Happiness Is Being Ahead of the Curve
Small casual dining chain Cosi (COSI) has had its share of issues over the years, namely that it finally had a profitable quarter after 10 years as a public company. Several months ago, after seeing an interview that Jim Cramer did with Panera Bread's (PNRA) CEO, it occurred to me that Cosi might make a cheap acquisition for the company, which has been public about its interest in acquiring other chains. Cosi's recent rights offering has quelled that hope, for now anyway.
I'll also sometimes look at companies when deals have gone sour. In late May, Gores Group walked away from its $15 a share deal to acquire auto repair and retail name Pep Boys (PBY), which I've owned in the past.
Like Midas, Pep Boys is also real estate rich, but Gores was scared away due to questionable operating performance. For its trouble Pep Boys walked away with a $50 million breakup fee. Shares are now trading 33% below Gores takeout price, and very near tangible book value. Pep Boys may have some challenges in front of it, but I am intrigued by the fact that it owns the real estate for 232 locations, and four warehouses (1.4 million square feet). Some fleas, yes, but one I'm watching.
At the time of publication, the author was long KKD and COSI.This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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