Forgive me for rekindling a two week old story by Michael Santoli in Barron's (subscription required) July 9, 2007 issue but sometimes I need to ponder things a while. In the story Santoli suggests that FedEx Corp (NYSE: FDX) could "lure a private buyer at a 20% premium or more above it's current $110 share price".

This brings several points to mind about private buyouts and LBO's. Before I get to that let me state, short and sweet, I hate this idea - this would be a bad deal! As a shareholder I do not think 20% is enough. These deals don't happen over night. It often often takes six months to a year to close a deal like this, often longer. The stock closed today around $117, already 6.4% higher.

FedEx has been one of the truly great companies on the planet since Fred Smith started it. Not to slight Mr. Smith, who to the best of my knowledge has only done right by shareholders, but sometimes insiders have taken advantage of shareholders in LBO situations. In particular when they trade old public shares for new private shares and are rewarded twice, the second time, at the public shareholders' expense. It is a conflict if insiders receive favorable treatment as part of the buy-out group to go along with the deal.

I understand why a big company might want to take FedEx private. I do not understand why major shareholders would support such a sale without a much larger premium, and this Santoli does not discuss.

Those of you who are new to BloggingStocks can check out my other stories and read Chasing Value or Serious Money to find more potential opportunities and verify my track record as well.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.

July 9, 2007: Brent Archer - Taking advantage of FedEx buyout rumors