L-1: Buried in a press release?

September 21, 2010

We tend not to spend a lot of time reading press releases here at footnoted. That’s especially true for earnings press releases, which tend to be more-massaged than Wagyu beef. But yesterday, after L-1 Identity Solutions (ID) announced that it was being acquired by Safran in a $1.6 billion deal (including debt) we did our routine deal post-mortem and were surprised to actually find something interesting buried in this press release from Jan. 7. Here’s the very last sentence of the release, which announced preliminary fourth quarter results only days after the year had actually ended:

—Our strategic goals and objectives in 2010 will be to perform on programs in backlog, win new domestic and international programs and explore strategic alternatives to enhance shareholder value.

That statement — really almost an afterthought — came from Robert LaPenta, L-1’s CEO. During the conference call that followed, one analyst — John Croke from Jeffries & Co — picked up on the sentence and asked LaPenta what exactly he meant. Here’s a snip:

John Croke:
Going to the press release, the very last statement you made talking goals for 2010, you mentioned exploring strategic alternatives to enhance shareholder value. And I was just wondering if you could expand on that, is this something that reflects a recent decision made by the board? Or is this just more of a general statement?

Bob LaPenta:
I think those of you that are familiar with this company and the journey we—ve been on for the past three years are familiar with the fact that I always said that we wanted to build a great company and I really believe we—ve done that. I also said that as management, and that includes the Board, we have a responsibility to enhance and make sure that we’re providing value to our shareholders. I said that when 2010 came that as a line I had drawn on the sand and 2010 is here. What that means exactly you know I—ll leave to your interpretation but I think it’s a self-explanatory statement.

In subsequent filings, the company continued to mention its strategic review in the most bland boiler-plate language possible. It was still ongoing and there were several strong options. Meanwhile, while it was reviewing its options, the stock price was having a bit of a rocky ride, climbing sharply in February before falling in early May and again in mid-July. And the SEC was asking lots of questions, judging by the string of comment letters between the company and the SEC that we saw in the filings.

With the stock up 20% on the news, what’s the lesson here? That sometimes, you don’t need to dig into the footnotes because interesting information may be buried in plain sight.

Image source: Lucies Farm

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