More About That Furniture Company

As I indicated yesterday, Costa Brava, the hedge fund managed by Roark, Rearden, & Hamot, wants to take over the board of a Virginia based furniture company.

It is a challenging business in these days of disintermediation, and Bassett has been shrinking. Of course, they prefer words like "consolidating" and "cost-cutting." But they're shrinking.

In the words of their latest annual report, "Over the last seven years, we have reduced our number of facilities from 13 to 3 and reduced our headcount from approximately 4,200 to 1,450. During 2007, we closed a large wood manufacturing facility in Bassett, Va. This resulted in headcount reductions of approximately 280 employees and leaves us with one small wood assembly plant in Martinsville, Va., one fiberboard supply facility in Bassett, Va., and one upholstery facility in Newton, N.C."

They also seem nowadays to receive a lot of their income not from the furniture business at all, but from running their own portfolio. They have $51.8 million invested in The Bassett Industries Alternative Asset Fund LP.

Hmmm. So is Costa Brava actually trying to obtain control over the furniture company -- that wood assembly plant, the fiberboard supply facility, the upholstery facility -- or is this a matter of one hedge fund trying to merge with another. Except that the merger target still has some of the trappings of a furniture company around it?

There's 11.8 million shares of Bassett outstanding. The stock price is in the neighborhood of $12. Simply multiplying them gives us a market cap of about $140 million. So the "alternative asset fund" is more than one-third of that, raising the prospect (in my simple mind anyway) that the fund is the prize, not the fibreboard.