Wednesday, September 28, 2005

Zapata Corp
Ticker: ZAP

You may recall our May 11 report on tiny Zapata Corp, a holding company which owns significant stakes in two publicly traded companies, Omega Protein, (ticker:OME)and Safety Components Inc, (Ticker :SAFY)and has a nice amount of cash on it's balance sheet. The main reason we liked the company was because in our minds, (however small they may be) buying Zapata shares was the cheapest way to gain exposure to Omega Protein, whose fish oil business we like.

On September 26th, Zapata announced that it has sold, subject to shareholder approval, its 77 percent stake in Safety Components to a private equity investor, Wilbur Ross, for $51.2 million, or $12.30 per share( by our calculation, but we don't yet have all the details.) At the time of our May research piece, Safety was trading at $14.95 per share, and most recently traded on the OTC Bulletin Board at $14.00. While we are disappointed with the sale price, it reflects a discount because Zapata's stake is large, and Safety Components has little liquidity. Such discounts are somewhat customary, and in some cases, quite larger. We don't know all the details of the deal yet, but will update the sum of the parts valuation summary we produced in May, once they become clear.

In any event, the news has had little effect on Zapata, which is down 20 percent since our May report. We still hold Zapata shares, and will be quite interested to find out how Mr. Glazer, as in Malcolm Glazer, 51 percent owner of Zapata, will utilize the proceeds.

*The author has a position in Zapata. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.

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