|From: Glenn Petersen||10/23/2014 7:22:35 PM|
|Drawn to Lost Causes, Hedge Fund Seeks to Turn Them Around|
By William Alden
New York Times
October 23, 2014 5:12 pm
RadioShack is burning through its cash. American Apparel is reeling from chaos in the boardroom.
As these two prominent retailers struggle in the throes of financial recalibration, an under-the-radar hedge fund has emerged as perhaps their last hope for salvation.
The hedge fund, with the unassuming name of Standard General, doesn’t like to stand out. When its founders, Soohyung Kim and Nicholas Singer — two young stars at the investment giant Och-Ziff Capital Management — opened their own firm in 2007, they rejected the Greek gods and mythical beasts that had inspired the likes of Apollo Global Management and Cerberus Capital Management. They liked that “Standard General,” which was inspired by hoary brands like Standard Oil and General Electric, didn’t even sound like the name of a hedge fund.
But now, almost in spite of itself, Standard General has landed squarely at the center of two of this year’s most visible corporate turnaround efforts in retailing.
The hedge fund struck an unlikely alliance this summer with Dov Charney, the public face and founder of American Apparel, and now holds substantial leverage in determining the retailer’s future. And this month, Standard General inserted itself more deeply into the affairs of a far more troubled retailer, RadioShack, signing a deal that could give it and its partners up to 80 percent of the company’s shares next year.
Just a few months ago, few even on Wall Street, let alone the shoppers at those retail brands, had even heard of Standard General. The firm, which manages a little more than $1 billion in assets, was previously known only to media specialists as a behind-the-scenes player in a series of TV broadcasting deals. But in playing tough with two embattled retailers, the hedge fund stepped onto its biggest stage yet.
“We’re not trying to be flashy or abrasive,” David Glazek, a partner at Standard General, said in an email sent by a spokesman. “We’re just trying to be matter-of-fact about things.”
Mr. Kim, 39, the hedge fund’s managing partner, grew up a world away from Wall Street. Born in South Korea, he arrived in Queens at the age of 5 and learned English by watching “Sesame Street” and “Mr. Rogers’ Neighborhood.” After fencing at Stuyvesant High School and rowing crew at Princeton, he started on Wall Street as a credit analyst at Bankers Trust. At 24, he followed a Bankers Trust partner, Stephen C. Freidheim, to Och-Ziff, where they created a credit investing arm. After helping Mr. Freidheim set up a spinoff firm, Mr. Kim and Mr. Singer left to strike out on their own.
Standard General’s first big test came in the financial crisis. Mr. Kim and Mr. Singer were able to attract $100 million in seed capital from the Reservoir Capital Group, which backs start-up hedge funds, shortly before markets plummeted. The fund was down about 6 percent in 2008, but it avoided more severe losses largely because of bearish bets against the stocks and bonds of companies in finance, gambling and media.
After the market bottomed, the fund reversed course and placed large bets on the success of gambling and media stocks. Last year, when the average stock-focused hedge fund in the United States returned 15.1 percent, according to Absolute Return, Standard General posted a 32.5 percent return, according to a letter sent to its investors.
This year, however, Standard General has been weighed down by its signature TV broadcasting investment, Media General. In January, after the value of the stake had grown disproportionately large, the firm put part of it into a separate vehicle. But the stock has since fallen. The flagship fund was up an estimated 3.26 percent through September, but the Media General shares were down 42 percent, according to messages to investors.
Quirky investments have never deterred the fund. In early 2008, it bought a power plant in upstate New York, selling it a few years later at a profit. Though a relatively small investment, it submitted a $25 million proposal in 2011 to rehabilitate Rye Playland, the government-owned amusement park on the shores of the Long Island Sound. A presentation for the pitch said Mr. Kim and Mr. Singer, who grew up in Harrison, N.Y., were “frequent visitors to Playland as children” and have a “strong emotional attachment” to the park.
The plan, which lost out to a homegrown proposal, is back on the table after the winning proposal was scrapped. Mr. Singer, who left Standard General last year after investors pushed the fund to move away from the style of private-market investing that was his specialty, continues to represent the entity that the hedge fund created to pursue the Playland bid, appearing last month before the Westchester County Board of Legislators to reiterate his interest.
So far, the response from some local politicians has been cool. “I’m just concerned that their goal is to maximize shareholder value,” said Michael B. Kaplowitz, the board’s chairman, adding that he did not know Mr. Singer had left Standard General. “If the return doesn’t come back, are they going to then step away, invest less, try to get out of the contract?”
It was an affinity for troubled companies that brought Standard General to American Apparel.
The hedge fund, which owned the retailer’s bonds, contacted the company this year with a lending proposal. Though it was rejected in favor of an equity financing, the proposal established a relationship between Standard General and Mr. Charney that became useful to the hedge fund when Mr. Charney was later fired by his board.
Under investigation by the board over possible misconduct, including accusations of sexual harassment, Mr. Charney agreed to give the hedge fund control over his 43 percent stake, an unusual step that helped Standard General win three of seven seats on American Apparel’s reconstituted board. In offering Mr. Charney the deal, Mr. Kim encouraged him to think twice before signing it, pointing out that it significantly limited his options, a person briefed on the matter said. Mr. Kim also said that he was “saving” the company, a different person briefed on the matter said.
Through the spokesman, Mr. Glazek said Standard General was “not interested in control for its own sake.” Yet, in the case of RadioShack, which was rapidly running out of cash when it did the deal with Standard General this month, the hedge fund has insulated itself against losses and could eventually wield an even greater degree of influence.
Working with other investors, Standard General bought a RadioShack credit facility from GE Capital, while also providing the company with $120 million of cash to be used as collateral. If RadioShack meets certain requirements, including surviving through the holiday season with enough cash on hand, the $120 million will be converted to equity. Depending on how much stock other investors buy, the hedge fund and its partners would then own about 50 percent to 80 percent of RadioShack’s stock.
Standard General’s strategy to help the retailer survive involves reworking RadioShack’s contracts with cellphone carriers, which require the retailer to reimburse the carriers if customers default on their bills, according to a person briefed on the plan. If the company is forced to file for bankruptcy, Standard General would be in a relatively strong position to recover its investment as a creditor holding first lien debt.
Analysts who see bankruptcy as the most likely outcome questioned why Standard General would want to get involved.
“Standard General made a bad investment. They made a mistake,” said Michael Pachter, an analyst at Wedbush Securities. “They’re throwing good money after bad.”
Yet Mr. Kim appears to be motivated by an urge to fix seemingly intractable problems. As a member of the Stuyvesant High School Alumni Association board, he pushed to merge the association with two other alumni groups that each competed for donations, a task that required years of negotiations. When the merger was done this summer, Mr. Kim was elected president of the combined group.
He may be a vocal supporter of Stuyvesant, but he is tight-lipped about his investing activities.
“I found out he was invested in American Apparel through The New York Times,” said Jukay Hsu, a member of the alumni board who considers himself a friend of Mr. Kim’s. “It’s not something we speak about.”
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|From: Glenn Petersen||10/27/2014 1:55:31 PM|
By James Surowiecki
The New Yorker
November 3, 2014 Issue
Credit Illustration by Christoph Niemann
For most of this year, corporate America has exhibited a full-blown case of merger mania. Deals worth more than a trillion dollars have been announced. But there is also something odd going on: the urge to merge has been accompanied by an urge to purge. According to S. & P., the number of spinoffs announced so far this year is nearly thirty per cent higher than the number for the whole of 2013, and, in the past month, three big tech companies announced breakups. Hewlett-Packard and Symantec are both dividing their operations in two, while eBay is spinning off PayPal—all dramatic changes of direction. Between 2001 and 2011, Hewlett-Packard spent almost sixty-six billion dollars on acquisitions in the hope of making itself a one-stop shop for tech customers. Symantec is effectively reversing its 2005 acquisition of Veritas, which it said at the time would create great “synergies” among its products. As for eBay, as recently as January it was telling investors that “we have been successful exactly because PayPal and eBay are together.” Now all these companies are saying that the parts are more valuable than the whole.
No one’s upset about the U-turns, because breakups, unlike mergers, have a solid track record. Studies have found that spun-off stocks have consistently beaten the market by a wide margin. Emilie Feldman, an assistant professor of management at Wharton who has done a series of studies of divestitures, told me, “It isn’t just the stock price. Spinoffs also improve the short- and long-term performance of the companies themselves.” In companies with lots of divisions and product lines, it’s hard for executives to concentrate on the core business. “When you’re mixing and matching and trying lots of different things at the same time, it’s just a constant drain on executives’ attention,” Feldman said. In a study she conducted of the reasons companies give for splitting, ninety-two per cent said that improving “managerial focus” was key.
Breaking up has other advantages, especially if one part of your company is growing faster than the rest, or is significantly more profitable. These days, PayPal is likely more valuable, in investors’ eyes, than eBay. So, if you’re working for PayPal but getting compensated in part with eBay stock options, you’re being paid less than if the companies were separate. Feldman, in a study of more than two hundred spinoffs, found that people running higher-earning divisions were undercompensated relative to performance. After a spinoff, she said, “everything falls right into line, and people get paid based on their performance.” Especially in a place like Silicon Valley, that makes it a lot easier to hire and keep the right people.
The success of divestitures doesn’t mean that mergers are always a mistake. The acquisition of PayPal by eBay, in 2002, was the kind of deal that often works—the purchase, at a reasonable price, of a young company that truly complements the buyer’s core business. (Google’s acquisition of YouTube is another example.) Being bought by eBay gave PayPal credibility and access to a huge customer base. But, as PayPal got bigger and eBay became less important to its business, the ownership structure got to be a burden. It limited PayPal’s ability to form partnerships with eBay’s competitors, like Amazon and Google, and, many have argued, made the company less innovative than it could have been. The decision to split is a recognition that PayPal has outgrown its parent.
In other cases, spinoffs are the final verdict on mergers that should never have happened in the first place. Symantec’s acquisition of Veritas was predicated on that shakiest of justifications—“synergy.” Symantec was a data-security company and Veritas a data-storage company; they were supposed to be a natural fit because, well, we all want the stuff we store to be safe, right? But it was a hopeless fit: the storage and security markets were very dissimilar, involving completely different sets of buyers. Symantec wasted years trying to integrate operations before admitting defeat. The storage division is now worth twenty per cent less than it was a decade ago.
And Symantec is hardly alone. The brute fact is that most mergers don’t work. Aswath Damodaran, a finance professor at N.Y.U., has said, “More value is destroyed by acquisitions than by any other single action taken by companies.” Furthermore, a study of some thirty-seven hundred acquisitions between 1990 and 2007 found that big mergers, like the ones Symantec and H.-P. did, were less likely to improve the bottom line than small ones. “Even when you have a deal that looks lovely on paper, it’s a huge challenge,” Feldman says. “Getting cultures to fit together, getting people to stay on board, merging I.T. systems and back offices: all these things are really hard.” If we’re seeing a boom in corporate divorce, it’s in part because the past decade gave us so many bad marriages.
Still, it’s unlikely that corporate America will lose its penchant for getting hitched. Between Wall Street’s desire to keep the deal pipeline stoked and the unshakable conviction of C.E.O.s that they can beat the odds, the trend toward consolidation is sure to continue. In fact, as soon as eBay announced the PayPal spinoff people began saying that the ideal outcome would be for PayPal to be acquired by some big company. The projected synergies, you can be sure, will be amazing.
James Surowiecki has been a staff writer at The New Yorker since 2000, and writes The Financial Page.
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|To: richardred who wrote (3765)||10/28/2014 10:46:50 AM|
| Twitter CEO Costolo Will Be “Opportunistic” on Acquisitions October 27, 2014, 5:32 PM PDT|
By Kurt Wagner
User growth issues continue to linger for Twitter despite beating Wall Street estimates Monday afternoon, and Twitter is working to find other ways to grow. As we’ve said before, an acquisition to help move things along may not be a bad idea.
Twitter’s monthly active users grew 23 percent over the same period last year to 284 million in Q3, but analysts latched onto timeline views, a metric better used to represent engagement, that is growing much slower than it was a year ago. Twitter CFO Anthony Noto told analysts to expect more of the same in Q4, and the stock is down more than 10 percent in after-hours trading as a result.
Buying something could help spur growth, and with $3.6 billion in cash on hand thanks to a recent debt acquisition, Twitter CEO Dick Costolo has ample opportunities. He’s being patient and will look for “opportunistic” acquisitions that may arise, he told Re/code in an interview following the earnings release. Costolo pointed to Vine, the six-second video platform, as an example of the types of acquisitions Twitter will be looking for down the road.
“That wasn’t something we were planning to go build or thinking about,” he said of the Vine acquisition from late 2012. “We saw what [the Vine founders] were doing, Jack [Dorsey, Twitter co-founder] and I loved it, and we were able to move quickly. That’s what raising the additional cash was all about.”
So Twitter now has the cash and stock handy to compete in almost any acquisition conversation it chooses, but that cash doesn’t appear to be burning any holes in company pockets.
While Twitter may be feeling outside pressure to make another content or user-growth-focused acquisition, Costolo says the company isn’t limited to those categories. He wouldn’t name specific industries of interest, but pointed to Twitter’s Crashlytics acquisition, which was on display at the company’s mobile developer conference last week, as another example of what Twitter may one day add.
As Twitter expands its business to include revenue streams and services outside of the traditional social network, it adds intrigue as to what Twitter may ultimately buy. In the meantime, Costolo has no problems waiting for the right opportunity.
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|To: Glenn Petersen who wrote (3839)||10/28/2014 11:00:00 AM|
|P&G's Duracell business now MSG|
Madison Square Garden explores splitting into two companies Updated October 28, 2014 10:15 AM
By BLOOMBERG NEWS
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Madison Square Garden on Nov. 26, 2011. (Credit: Getty Images / Bruce Bennett)
Madison Square Garden Co. is exploring splitting into two publicly traded companies to unlock value in the New York Knicks and New York Rangers sports franchises and buoy its entertainment business.
MSG, controlled by the Dolan family, has been considering since July a plan to house its sports teams and cable networks in one company and move its real estate assets and its concert and entertainment...
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|From: Cautious_Optimist||10/28/2014 11:37:00 AM|
|Call me crazy:|
Pounded TWTR's market cap is now $29.9B. Sounds like an absurd figure based on the short term fundementals, but not as wild as What's App? selling to Facebook for $19B in cash and stock.
Outside of FB, Twitter shares an elite social media sweetspot IMHO -- plenty of room to grow eyeballs and authors, and mobile + desktop platforms to monetize through less-obnoxious ads is higher than peers.
News breaks on Twitter. Even old analog media promotes tweets along side it's traditional "sources." Not just earthquakes and accidents, but cheap gotta-know real-time gossip too. Addicting. Local and global.
Twitter compliments Facebook, they do not compete...
High price? Yes. Strategic acquisition in the social network ecosphere? Absolutely. Will we gasp at the price paid? Of course.
In this evolving universe. M&A are likely to become bidder auctions for incumbents to block a rival.
Compared to conventional thinking in mature markets, the valuation is ridiculous. But in this space, its looking out years ahead, its strategy and also offense by defense.
I own TWTR. buying since the IPO. I am am usually a value + growth investor, in this case I have added "strategic value." I could be wrong, and then I'll tweet my self-flagellation.
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|To: Cautious_Optimist who wrote (3842)||10/29/2014 10:40:29 AM|
|I agree for the most part. One has to wonder if GOOG or Yahoo would like to own this. I eventually would like to own some. I sure wish it was through an acquisition on CNVR by way of Twitter stock. This on my previous successful CNVR speculation, and as a possible Twitter White Knight. CNVR would not be a costly one to Twitter, IMO. I think they need an acquisition. Public companies are sparse now. However there will be plenty of new private companies from which to choose. I just see so many continued uses of Twitter by Nielsen N.V. (NLSN)-NYSE. As mentioned earlier on this board. I still like ComScore Inc.(SCOR), but its had a nice run up since I put it on my watch list.|
Why Can't CNVR find a White knight in the Big ad space or by Twitter? The reasoning below. I can't think of any recent deals that would be this accretive to a target company's earnings
>Additionally, Alliance Data expects the acquisition to be accretive to its core earnings per share by 50 cents in the first year and 75 cents in the second. The Zacks Consensus Estimate for 2015 is currently pegged at $13.73. We expect the number to move north as analysts start incorporating the accretion in their estimates.
>The Transaction in Detail
Alliance Data will acquire Conversant for $2.3 billion, which is equivalent to $35 per Conversant share, a 34% premium to the 30-day average closing price of Conversant's stock. This consideration comprises 48% in cash and 52% in shares, which values Conversant’s shares at 10 times its 2015 adjusted earnings before interest, tax, depreciation and amortization (:EBITDA) of $230 million.
The exchange ratio of 0.07037 will remain fixed at close. The cash consideration will vary but lie within the $14.98 - $18.62 per share ($284 -$233 price per share of Alliance Data stock) band.
Though an acquisition, this agreement has been structured as a merger, where Conversant stockholders will own 7% of the combined company and the remaining 93% will be owned by Alliance Data stockholders.
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|To: richardred who wrote (3833)||10/30/2014 1:39:10 PM|
|Looks like TEX took a stake in MNTX. I am a former ASVI holder and TEX holder. This venture with the TEX investment in MNTX should give TEX about an 8% stake. CAT owned a big piece of ASVI which TEX eventually bought out. IMO if the venture works out well. I can see TEX wanting the whole thing. |
RE- GEHL was eventually acquired by manitou
Manitex International, Inc. Announces ASV, Inc. Joint Venture with Terex Corporation Terex to Invest $20 Million in Manitex International, Inc.
BRIDGEVIEW, Ill., Oct. 29, 2014 /PRNewswire/ -- Manitex International, Inc. ( MNTX), a leading international provider of cranes and specialized material and container handling equipment, today announced an agreement to form a Joint Venture with Terex Corporation in ASV, which has been a wholly-owned subsidiary of Terex ( TEX) since 2008, with its manufacturing facility in Grand Rapids, MN. As a result of the transaction, Manitex will own 51% of ASV and Terex will own 49% of ASV.
ASV's broad product line of technology-leading compact rubber-track and skid-steer loaders and accessories, extends Manitex's footprint to new markets, further adding to the company's diverse product portfolio offered through equipment dealers, worldwide. Total sales for ASV, Inc. are forecasted to be approximately $128 million in 2014 with gross margins and adjusted EBITDA* margins roughly in-line with those of Manitex.
David J. Langevin, Chairman and CEO of Manitex International commented, "We are excited to add a new branded product group to the Manitex family and are proud to announce that Terex, a long-standing leader in the capital equipment space, has selected us as its partner in ASV. We see encouraging signs in the end-markets in which ASV operates, and expect a gradual recovery throughout 2015. This transaction gives us an opportunity to increase our presence in the broader housing and construction markets, and consequently, increase earnings power for our company, beginning in the first quarter of 2015. Upon closing this transaction and the acquisition of PM Group, also expected to take place before year end, we would expect to enter 2015 as a company that has worldwide revenues of over $500 million, 9% EBITDA margins, and the ability to generate significant profits and value for our shareholders going forward."
Ron De Feo, Chairman and CEO of Terex, commented, "We are pleased to announce this joint venture with Manitex International and are confident they will bring additional value to the ASV business. We believe this will be a very productive transaction for both Terex and Manitex shareholders and look forward to continuing to serve our customers and all stakeholders with the same degree of excellent products and services they have come to expect."
The consideration for Manitex's majority share in ASV will be $25 Million, and the transaction is expected to close in the fourth quarter of 2014. At the time of our acquisition ASV will have approximately $60 million in bank debt which is non-recourse to Manitex and Terex. In a separate transaction, Terex has agreed to invest $20 million in Manitex common stock and convertible debt securities.
*Adjusted EBITDA is calculated by: GAAP Net Income plus Income Tax plus Depreciation and Amortization plus Interest Expense plus Foreign Currency Transaction gains/losses plus Other (Income)/Expenses.
About Manitex International, Inc.
Manitex International, Inc. designs, manufactures and markets a portfolio of highly engineered and customizable lifting, material and container handling equipment, spanning boom truck, telescopic, rough terrain and industrial cranes, reach stackers and associated container handling equipment, rough terrain forklifts, mobile liquid and solid containment solutions, and specialized trailers and mission oriented vehicles, including parts support. We have accumulated nearly a dozen brands since going public in 2006 and operate internationally through eight subsidiaries with design and manufacturing facilities in the USA, Canada and Italy.
Manitex Inc, in Georgetown, TX, manufactures a comprehensive line of boom truck and telescopic cranes and sign cranes, primarily used in industrial projects, energy exploration and infrastructure development, including roads, bridges, and commercial construction. Badger Equipment Company, in Winona, MN, manufactures specialized rough terrain and industrial cranes and primarily serves the needs of the construction, municipality, and railroad industries. Our Italian subsidiary, CVS Ferrari, srl, designs and manufactures a range of reach stackers and associated lifting equipment for the global container handling market. Our Manitex Liftking subsidiary is a provider of material handling equipment including the Noble straight-mast rough terrain forklift product line, Lowry high capacity cushion tired forklift as well as specialized carriers, heavy material handling transporters and steel mill equipment. Manitex Liftking's rough terrain forklifts are used in commercial applications and by the world's largest military and peace keeping organizations. Our subsidiary, Manitex Load King located in Elk Point, South Dakota is a manufacturer of specialized engineered trailers and hauling systems, typically used for transporting heavy equipment. Manitex Sabre based in Knox, Indiana, builds mobile specialized tanks for liquid storage and containment solutions for a variety of end markets such as petrochemical, waste management and oil and gas drilling. Manitex Valla located in Piacenza, Italy, manufactures a full range of mobile precision pick and carry cranes from 2 to 90 tons, using electric, diesel, and hybrid power options with configurable special applications designed specifically to meet the needs of its customers.
Our Crane and Machinery division is a Chicago based distributor of cranes including Terex truck and rough terrain cranes, PM knuckle boom cranes and our own Manitex International brands. Crane and Machinery provides aftermarket service in its local market as well as being a leading distributor of OEM crane parts, supplying parts to customers throughout the United States and internationally. The division also provides a wide range of used and refurbished lifting and construction equipment of various ages and conditions as well as operating a rental fleet of equipment to the Tri-state area.
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|To: richardred who wrote (3802)||11/1/2014 4:23:43 PM|
|How do you get rid of excess capacity in the oil patch? You put a choke hold on for now and consolidate. While asking your Nabor-NBR for a price break. |
Top 5 Eagle Ford stories of the week
5. This Week’s Top Energy Jobs
The energy industry – oil & gas sector in particular – is bracing itself for a massive wave of retirements over the short to medium term, which has been dubbed “The Great Shift Change.” As the industry prepares for this turnover, companies are looking to the next generation of candidates with skills ranging from finance, geology, engineering, law, etc. Read about the hottest jobs in the market here.
4. Carrizo creates bigger niche in EF
Carrizo Oil & Gas, Inc.
The Houston-based exploration, development and production company, Carrizo Oil and Gas, Inc., announced Monday that their acquisition of additional leasehold and producing interests in the Eagle Ford Shale from Eagle Ford Minerals, LLC was finalized. Read more here.
3. Oil prices don’t dictate the value of oilfield service companies
Getty Images via NewsCred
The recent and dramatic drop in the price of oil, which fell from $100 per barrel in August to around $80 in October, has many oil and gas service companies wondering if they missed an opportunity to sell at a decent price. However, according to John Sloan, vice chairman of Allegiance Capital, an investment bank specializing in mergers and acquisitions, “The value of a proven, well-managed, successful oilfield services company is not totally immune from the latest drop in oil prices, but we haven’t seen any negative impact on what buyers are willing to pay for companies.” Read more after the click.
2. 7 oilfield songs you won’t hear on the radio
Getty Image via NewsCred
…Here is a list of seven oil-related folk songs. Some you may recognize right away, while others may have been lost with time. At least now, the next time I hit up a jam session, I can bring a slice of the black gold reality with me. Check out the music right here on Eagle Ford.
1. Anadarko pushes progress in East Texas, Eagle Ford
Anadarko Petroleum Corp. is staking new claims in East Texas with plans to drill over 500 new wells across the region. Teaming up with KKR & Co., this is a major expansion for the company in a region where they were once highly productive. Read all about the new ventures here.
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