Friday, March 02, 2007

Lever Up and Give me the Cash

Commenting on Dean Foods' (NYSE: DF) recapitalization news (adding $4.8B in debt) and $15 per share special dividend, Deutsche Bank's analyst Eric Katzman said the action will put pressure on other CEOs to add leverage.

Leveraging up balance sheets and paying out massive dividend has been a tactic private equity firms have used to get quick cash out of their large buyouts. It called the dividend-recap.
Recapitalizations of public companies has been an increasing trend lately, but the tactic will likely become even more common.
Activist investors, who often see the value of adding leverage, will likely lead the recapitalizations movement of public companies. Why let the private equity guys make all the money?


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