Franklin Mutual Discloses 5.4% Stake in Eastman Kodak (EK), Suggests $6/Sh Special Dividend or Dutch Auction

July 14, 2008 12:50 PM EDT

In a 13D filing on Eastman Kodak Co. (NYSE: EK), Franklin Mutual disclosed a 5.4% stake in the company and a letter they sent to the company suggesting that the company return its substantial excess cash to shareholders rather than make a potentially dilutive acquisition.

Franklin Mutual specifically suggests that this cash could be returned to shareholders via a $6 per share special dividend or Dutch auction. The firms notes that a Dutch auction option could retire almost 50% of the outstanding shares.

From the Letter:

"The Board has before it an enormous opportunity to act in the interests of its shareholders and begin to stem the loss of confidence in management and the Board. As of the end of the first quarter of 2008, the company had $2.2 billion of cash. Given management’s track record, shareholders and prospective investors are legitimately concerned that a dilutive, over-priced acquisition is in the offing. We suggest that this cash could, and should, be returned to shareholders via a $6 per share special dividend or Dutch auction. The Dutch auction option could retire almost 50% of the outstanding shares. Even with a cash distribution of this magnitude (and according to the company’s own projections), this would leave the company a cash cushion of approximately $500 million and total debt to EBITDA coverage of approximately 3.0 times."

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