Leucadia National

  • Overview
THE SCOOP

Finding diamonds in the rough

New York-based Leucadia National is a diversified holding company whose strategy is to buy and increase the value of undervalued or troubled companies while taking advantage of any tax breaks.  The company's style and practical strategy of fixing troubled companies that make common products has led to comparisons with another somewhat famous holding company, Berkshire Hathaway.  Leucadia owns companies in numerous industries, including manufacturing, medical product development, real estate, gaming entertainment, banking, mining and even winery operations.  The company is also involved in telecommunications, including local and long-distance telephone services, Internet services, Web development and collection services.  Leucadia also develops commercial and residential real estate and provides consumer and specialty insurance as well as reinsurance services.  Founded in 1854, Leucadia was once ranked No. 53 on BusinessWeek's list of Hot Growth Companies and was No. 20 on Fortune's 2006 list of Fastest Growing Companies, up from No. 59 in 2005.  The company’s 2008 revenue was at $1.080 billion, down from $1.15 billion the previous year.

Match made at Harvard

Chairman Ian Cumming and President and Director Joseph Steinberg met at Harvard Business Schoolâ€"both having graduated in 1970.  Both hold about 13 percent of the company's shares.  Cumming also serves as chairman of the board of Barbados Light & Power, director and chairman of the Finova Group, director of subsidiary Allcity Insurance and a director of Utah-based regional carrier Skywest.  Cumming is also a director of HomeFed and Carmike Cinemas.  In a June 2007 article, Seeking Alpha said of Leucadia's top dogs, "Cumming and Steinberg are extraordinarily versatile investors, and have succeeded in real estate, medical devices, plastics, wineries, finance, telecom, energy, insurance and travel.  They'll buy when everyone else hates a business or a sector.  Their track record is tremendous, as Leucadia's stock compounded from 1979-2006 at 24.9 percent.  When they took [Leucadia] over, it had negative equity of $7.6 million.  Today, equity is around $4 billion."

In the habit of buying and selling

Leucadia has kept business sales coming at a fairly vigorous pace during the past few years.  In 2005, the company beefed up its manufacturing holdings with the acquisition of NSW which makes packaging nets, case liners and other types of industrial netting.  Another 2005 success was its $133 million bid to buy Idaho Timber Corporation which remanufactures dimension lumber and specialized wood products.  In July 2006, the firm sold Symphony Healthcare Services to RehabCare Group for $107 million, and in September 2006, Leucadia sold ATX Communications to Broadview Networks Holdings, receiving about $85.7 million in aggregate cash consideration.  At the end of 2006, the firm ended up with net security gains totaling around $117.2 million which was mostly derived from selling publicly traded debt and equity securities.  For its fiscal year 2006, Leucadia reported revenue of $862.67 million, up from $689 million in 2005.  Net income was $189.4 million, down from $1.64 billion in 2005 due to the sale of Tulsa, Okla.-based WilTel Communications Group.  In late 2003, the firm bought WilTel (the bankrupt Williams Communications) and its nationwide fiber network for $780 million.  WilTel became Leucadia's biggest revenue generator, making up about 70 percent of its sales.  But the catch was that SBC Communications accounted for most of WilTel's income, and in 2005, SBC announced that it would buy AT&T and naturally use AT&T's network instead.  In late 2005, Leucadia sold WilTel to Level 3 Communications for about $680 million in cash and stock.  Things turned a little ugly, though, when Hurricane Katrina struck in 2005.  One firm in which Leucadia holds a controlling interest, Premier Entertainment Biloxi, which owns Hard Rock Hotel & Casino Biloxi in Mississippi had to file for Chapter 11 bankruptcy in an attempt to rebuild the damaged casino.  Two years would pass before Premier finally reached a settlement.

Mysterious involvement

Leucadia was called out in December 2007 for its association with ParkerVision, a Florida company that makes wireless radio frequency technologies.  In an investigative article by Barron's, the company was highlighted for at one time being an investor in ParkerVision, a company that critics say is guilty of making empty promises about its forthcoming technology.  The Barron's piece said Leucadia is no longer an investor in the company but revealed that David T. Cummingâ€"the 63-year-old younger brother of Leucadia's chief executive, Ian Cummingâ€"had been defending ParkerVision in online chat rooms.  According to Barron's, "David Cumming says he heard about ParkerVision through Parker's patent lawyer, Robert G. Sterne.  Cumming was a director at CNA Surety, but he'd previously spent 15 years working at his brother Ian's Salt Lake City-based Leucadia.  In 2000, after some due diligence, Cumming convinced the value investors at Leucadia to join with a unit of Tyco International (TYC) in buying 8 percent of ParkerVision for about $30 million, at 30 bucks a share.  By October of that year, the stock hit $56, putting ParkerVision's value at $750 million."  According to Barron's, while promising a single-chip radio--"the Holy Grail of the wireless industry"--ParkerVision let deals with IBM, Symbol Technologies and PrairieComm slip through its fingers.  Unable to convince wireless manufacturers' of the new invention, ParkerVision tried selling its own Wi-Fi cards with the technology.  By 2005, the stock's valuation had dropped to $75 million.

To the rescue

Leucadia announced in April 2008 that it would be assisting New York-based investment bank Jefferies by acquiring a 14 percent stake in the company for about $434 million.  The terms of the deal included Leucadia selling 10 million of its common shares to Jefferies and Leucadia getting two seats on Jefferies' board of directors.  Meanwhile, Leucadia agreed that it wouldn't sell off any Jefferies shares for two years unless it receives the consent of Jefferies' board.  Additionally, Leucadia said that it wouldn't purchase more than 30 percent of Jefferies' shares.  And two months later, it stayed true to its wordâ€"but just barely.  In June 2008, Leucadia revealed (in an SEC filing) that it had bought even more Jefferies stock since April, acquiring an additional 17.7 million shares on the open market for about $322 million.  This increased Leucadia's share of Jefferies to 48.6 million shares or 30 percent of the company.

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Leucadia National


315 Park Avenue South
New York, NY 10010-3607
Phone: (212) 460-1900
Fax: (212) 598-4869
www.leucadia.com

STATS


  • Employer Type: Public
  • Stock Symbol: LUK
  • Stock Exchange: NYSE
  • President: Joseph S. Steinberg
  • 2008 Employees: 3,584

Key Financials

  • 2008 Revenue: $1,081 million

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