Eyeing Lucre from Licorice

A funny thing happened to Ron Perelman on the way to a sweet deal: He had to unravel it. In an out-of-court settlement on July 29, Perelman canceled a pact he struck in 2001, in which he sold his 83% stake in Panavision to M&F Worldwide (MFW ), of which he owns 53%, for $129 million, or 17 a share. At the time, Panavision, a maker of movie cameras, traded at 4. M&F shareholders howled: They accused Perelman, who also controls Revlon, of self-dealing--and sued him. After more than a year in court, Perelman agreed to scuttle the deal: He took back his Panavision shares and returned M&F's $80 million, plus $10 million and $48 million worth of M&F stock he got as part of the Panavision sale. The suit was initiated by Daniel Breen of Furtherfield Partners, a Houston hedge fund that owns more than 50,000 M&F shares.

Perelman's next move? "It's possible Perelman may take M&F private, so he could do what he wants with it," says Breen. Now trading at 5.50, M&F is "an attractive company in a very good niche business," says Breen, who puts the value of its assets at 15 a share. He says Perelman bought his M&F stake in 1996 at 19. Breen estimates that M&F, the top producer of licorice extract used by tobacco and drug companies, generates free cash flow of $30 million a year, or $1.66 a share, and has little debt. M&F, whose customers include Philip Morris and R.J. Reynolds, controls 80% of the licorice market, notes Breen. He sees M&F earning $1 a share in 2002--without Panavision. In 2001, M&F earned only 24 cents, because of losses at Panavision. Perelman declined comment.

By Gene G. Marcial

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