Independence Hldg IHC
August 10, 2002 - 11:45pm EST by
matt657
2002 2003
Price: 20.00 EPS
Shares Out. (in M): 0 P/E
Market Cap (in $M): 155 P/FCF
Net Debt (in $M): 0 EBIT 0 0
TEV (in $M): 0 TEV/EBIT

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Description

On 7-30-02, INHO announced the sale of its property and casualty subsidiary, First Standard Insurance Co. (FSHC) to SoftNet Systems (SOFN) for $32mln cash. As part of the transaction INHO is purchasing a substantial percentage of SOFN's outstanding shares and taking control of the company. SOFN has in excess of $200mln in NOLs. SOFN will be the focus of this report as it is poised to become INHO's tax-free profit growth engine. (go to VIC write-up on Softnet - see "new write-up" dated 8-24-01 in the message preview - this was my VIC application write-up and will give you SOFN's background as a discount to cash NOL shell).
Bullet Points of the deal

1. Upon closing, all current SOFN personnel will terminate - INHO management and employees will operate the company

2. SOFN buys unit from INHO for $32mln cash. SOFN still to have $30mln cash balance post closing -SOFN mkt cap=$59mln

3. INHO purchases 5mln SOFN ($2.38) shares (from PCW)at $3/shr

4. INHO to tender from shareholders "at least" 3mln SOFN shrs at $3 post closing

5. INHO permitted to purchase an additional 5mln shares - that + 5mln + 3mln = 13mln or 52% (this has only been disclosed in INHO's SOFN 13d filed 8-8-02)

6. Proxy outlining pro-forma numbers to be out by 8-15-02

7. 5% poisen-pill to be implimented to protect the NOL

Valuations based on transaction vs $59mln current mkt cap:

1. INHO's purchase of shrs at $3 each represents a SOFN valuation of $75mln based on its 25mln shrs outstanding

2. SOFN to "retain over $30mln cash in addition to cash avail. at First Standard" (the acqired unit) + $32mln purchase price = $62mln

Please forgive the brief nature of this write-up. There's just not much more to discuss until the the proxy is out. I am anticipating the proxy to be a catalyst as pro-forma numbers and further details of INHO's plans for SOFN will be disclosed. INHO has solid management who have successfully grown the business. Read the 7-30 press release as well as the 13d and keep your eyes peeled for the proxy. In the meantime shares are trading at a big discount to INHO's perceived value of SOFN.

Catalyst

Proxy should be out within a week
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