Investing

Should Private Equity Firms Only Buy Very Unique Companies? (APO, CKXE, CLCT, DEST, LULU, MSG, OMEX, PRXI, RICK, RGLD)

Private equity firms are known for finding value and milking additional value out of many public companies.  Some companies are very generic and bought for cash flow, while others are unique and harder to value.  This morning came news that private equity giant Apollo Global Management, LLC (NYSE: APO) is making a very uniques acquisition of CKX Inc. (NASDAQ: CKXE).  This deal is only likely to highlight other ‘value’ in other unique public company business models.

CKX is far from a normal public company and it was one of several highly unique public companies we have recently featured and most of these could even be classified as cult stocks.  Pinpointing a real value in CKX comes down to “beauty is in the eye of the beholder.”  The company owns the rights to the name, image and likeness of Elvis Presley and Muhammad Ali, the operations of Graceland, and proprietary rights to the IDOLS and So You Think You Can Dance television brands.  Robert F.X. Sillerman resigned as its Chairman and CEO to pursue a possible acquisition of the company but those talks ended in 2010.  The company’s total assets were $460.8 million at the end of 2010 and the buyout is being valued at close to $510 million.

We have highlighted each of these other unique public companies in a brief description below and that full prior article on unique companies goes much deeper into the operations and values of each.  Today we have only a brief description and a market capitalization rate compared to total asset values (not book values).

Collectors Universe Inc. (NASDAQ: CLCT) is effectively the last public company out there pertaining to grading and evaluating collectibles and grading other items.  The market cap here is about $120 million and the assets are about $37 million.

Destination Maternity Corporation (NASDAQ: DEST) screens out as a retailer, but it is effectively a pure-play in maternity clothing and apparel, with over 1,700 retail locations.  The market cap here is only about $300 million versus a total asset size of about $200 million.

Lululemon Athletica, Inc. (NASDAQ: LULU) has become so large that it will almost be forced to live up to its yoga-monopoly image.  Amazingly, very few ‘knock-off’ imitation companies exist on their own.  Lulu’s market cap is now over $7 billion and its valuations totay are likely to scare away a buyer; its total assets were valued recently a about $500 million.

Madison Square Garden, Inc. (NASDAQ: MSG) fits right in for private equity via sports teams, entertainment, and highly recognized venues.  The Garden has a $2 billion market cap and its total assets were listed as worth close to $2.2 billion.

Odyssey Marine Exploration Inc. (NASDAQ: OMEX) is basically a publicly traded treasure hunting outfit.  Why not get a bunch of billionaires to scuba dive ancient shipwrecks?  Total assets are listed as about $19 million versus a market cap of about $235 million.  That market cap does not really include its potential project values and future finds.

Premier Exhibitions, Inc. (NASDAQ: PRXI) is truly unique, part artifact-owner and part museum. It owns the BODIES exhibit and has the Salvor-In-Possession rights to the shipwreck of HMS Titanic and has the museum exhibit Titanic: The Artifact Exhibition. Its market cap is only about $85 million and its total assets are listed as being about $37 million.

Rick’s Cabaret International Inc. (NASDAQ: RICK) is truly unique as it screens out as a “restaurant” in financial screens. It is America’s broadest play on “adult nightclubs for businessmen and professionals.”  Its market cap is just over $100 million with a total asset valuation of close to $150 million.  Obviously, the big question will be if a private equity firm wants to explain why it suddenly owns strip clubs.

Royal Gold, Inc. (NASDAQ: RGLD) is not your normal gold stock as it is involved in royalty acquisitions.  Amazingly, it has only about 20 employees and commands a market cap of $3.25 billion with a total asset valuation of $1.86 billion.

Maybe some of these companies can fit into a private equity portfolio. Keep in mind that some may be too unique or may be in industries which private equity firms choose to avoid.

That more detailed review of very unique public companies is here.

JON C. OGG