A wild card has turned up at Midas (MDS ). Buyout artist Ben LeBow has emerged with a 5% stake through his New Valley outfit, whose principals include Carl Icahn. Value players such as Mario Gabelli have flocked to Midas, owner and franchiser of more than 2,000 auto-repair shops in North America, especially after shares skidded from 17 on May 7, 2001, to 9.90 on Sept. 28--way below their private market value. Since then, the stock has rebounded to 13.62, as Midas caught the eye of technical and fundamental analysts. The technicians saw the price runup as a sign that big buyers were accumulating shares. "This often is a prelude to a takeover," says Andrew Addison of The Institutional View, which tracks trading patterns. Midas is worth 22 to 25 a share, he says. In the most recent filing with the Securities & Exchange Commission, New Valley said it wants to help shape decisions that affect Midas.
If Midas fails to drive the stock up, "LeBow might become more active," says Jim Barrett of C.L. King, who rates Midas a strong buy. New Valley President Howard Lorber says that he is prepared to "act quickly should Midas fail to execute," noting, "the stock is cheap based on its assets." New Valley invests mainly in real estate. And says Barrett: "We surmise that Ben LeBow has correctly calculated that the real estate alone is essentially worth the current share price." Midas' earnings fell from $2.27 a share in 1999 to $1.05 in 2001, as car repairs slowed in the recession. "But longer-term, Midas' fundamentals are attractive." Barrett sees Midas earning $1.15 a share in 2002 and $1.25 in 2003. A Midas spokesman says it hasn't heard from LeBow.
By Gene G. Marcial