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Conseco Inc. shares tumbled today, despite the company’s announcement before trading opened that it was working with investment firm Morgan Stanley to explore “strategic alternatives” aimed at boosting its sagging stock.
Such pronouncements typically signal a company is putting itself up for sale, raising the prospect of a rich payoff for shareholders. But Conseco likely has few interested suitors, said Jukka Lipponen, an analyst with Keefe Bruyette & Woods in Hartford, Conn.
“People have speculated about Conseco getting sold. I have previously viewed, and continue to view, that as very unlikely,” Lipponen said.
He said the problem for Conseco is that it continues to have substantial exposure to long-term-care insurance, a loss-plagued insurance line that many insurers have exited. “It’s not likely they would want to get back into the business,” Lipponen said. “That means Conseco is not a very good strategic fit for many people.”
Hurting the stock today, Lipponen said, was another round of tepid financial results. In a separate announcement before the market opened, Conseco said it expected to report a fourth-quarter loss of $72.2 million, or 39 cents per share, on revenue of $1.1 billion. For the year, Conseco expects to report a loss of $196 million, or $1.21 per share, on $4.6 billion in revenue.
Conseco shares traded this morning at $8.94, off $1.12, or 11 percent on the day. The stock is off 58 percent since June 2007.
The company this morning disclosed it has been working with New York-based Morgan Stanley for “several months.” In the same release, the company reported that it has rejected a request from one of its largest investors, New York-based Steel Partners II, to nominate two of its representatives to Conseco’s board.
“We share with Steel Partners, as well as our other shareholders, a common interest in taking actions that will increase the value of the company for shareholders,” Conseco CEO Jim Prieur said in a statement. “In that regard, we have been working with a major investment bank … regarding strategic alternatives and plans to maximize shareholder value for Conseco.”
Conseco employs about 2,300 in Carmel. At the company’s current stock price, it has a market value of $1.7 billion.
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