Newspaper article The Florida Times Union

Takeover Rumors Boosting St. Joe

Newspaper article The Florida Times Union

Takeover Rumors Boosting St. Joe

Article excerpt

Byline: MARK BASCH

It's been a tough year for shareholders of The St. Joe Co., who have had their stock battered in the spring by the Gulf Coast oil spill and in the fall by attacks from a prominent hedge fund manager. But the stock got a little bit of a lift last week from takeover rumors. And its largest shareholder also gave some additional support to the company.

St. Joe's stock rose $2.37 to $20.17 Wednesday and Thursday, apparently because of takeover talk in the market. Several financial news organizations reported that the buyout rumors were out there, but gave no other information. In fact, a column on the investing website The Motley Fool said the rumors were "unsubstantiated" and added: "when I say 'unsubstantiated' I mean that with a capital 'U' and a double underscore."

The New York Stock Exchange issued a news release Thursday saying it contacted St. Joe because of the unusual market activity in the stock. "The company stated that its policy is not to comment on unusual market activity or rumors," the news release said.

But at least the rumors were a bright spot for shareholders who have seen the stock drop from a high of $37.44 in April to a low of $17.04 last month.

The stock was first hurt in the spring when the oil spill threatened to damage St. Joe's waterfront properties in the Florida Panhandle. St. Joe owns 576,000 acres of land in Florida, mainly in the Panhandle, and has moved its corporate headquarters out of Jacksonville to the Panhandle.

The company's properties were not severely damaged by the oil spill, and St. Joe is pursuing legal action against firms that had roles in the spill.

But once that storm passed, St. Joe's stock was hit again in October when hedge fund manager David Einhorn announced he was shorting the stock - that is, betting the stock will fall - because he thinks the company's land holdings are overvalued. Einhorn is well known on Wall Street for shorting Lehman Brothers Holdings Inc. before the investment firm collapsed in 2008, so he has a lot of credibility in the investment community.

Einhorn dismissed the St. Joe takeover rumors last week, saying in an interview with Bloomberg Television that a buyout would be "very tough."

"The company has negative profits with no means of generating ongoing cash to service debt," he said.

St. Joe officials have long contended that while development has been slowed by the recession, its properties have high long-term value and investors will be rewarded over the long haul. And while Einhorn has been a loud critic of the company, St. Joe also has a prominent supporter in Bruce Berkowitz, who was named domestic stock fund manager of the decade last year by Morningstar Inc.

Berkowitz's firm, Fairholme Capital Management LLC, controls 29 percent of St. Joe's stock. …

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