Zacks_Analysts' Blog : LUK Completes 30% Stake Sale - Analyst Blog

Leucadia National Corporation (LUK) announced the completion of a 30% stake sale in Cobre Las Crucescopper mining project to Canada's Inmet Mining Corp. As disclosed earlier, the transaction value was approximately $480 million and additionally, LUK was released from a guarantee of $72 million debt owned by Las Cruces to an affiliate of Inmet.

As per the terms of the agreement, of the total sales consideration, Leucadia received roughly $150 million in cash and 5.4 million Inmet’s shares (roughly 8% of outstanding shares) worth $330 million. The share issuance was based on Inmet's weighted average trading price on the Toronto Stock Exchange for the 10-day period which ended on November 26, 2010.

Pursuant to the completion of the transaction, Leucadia owned roughly an 18% stake in Inmet and incurred a gain of $280 million based on Inmet’s closing share price on November 29.

Leucadia is engaged in manufacturing, telecommunications, oil and gas drilling services, property management and services, gaming entertainment, real estate activities, medical product development operations and various other investment activities in the United States. The extensive diversification has not only helped the company flourish over the years but has also strengthened its future growth prospects.

In the third quarter of 2010, Leucadia disposed of its operating retail shopping center in Long Island, New York, which was under the Domestic Real Estate segment. The company also sold ResortQuest (Property Management and Services) and STi Prepaid (Telecommunications).

The company's investments in volatile materials such as base metals reduce the value of its investments. Moreover, Leucadia faces intense competition from various companies in different industries including Apollo Investment Corporation (AINV), The Blackstone Group (BX) and privately-held H Group Holding Inc.

We currently maintain our Neutral recommendation on Leucadia.