David and Goliath Warfare or RTK and BTU Cooperation

You know the David and Goliath story. Goliath represented a country that wanted to expand and was resorting to aggression to do it. The upstart David stood in the way and was defending his turf. Kill and destroy was the technique being used. We love the story of the little guy who won the battle, became a King, and spent much of his life and his kingdom’s resources fighting the Philistines.
America needs to develop methods of producing more energy. BTU is the symbol for Peabody Energy Corporation, the Goliath, that has 8,300 employees. For the six months ending on 30 June 2006, its revenues increased 20% to $2.63 billion, and net income increased 93% to $283.7 million. It is primarily a coal-mining company with modest diversifications. Rentech Development Corporation (RTK) is like David in comparison; it has a few more than a hundred employees and operates at a loss. It is an interesting company, however, because its expertise is in transforming underutilized hydrocarbon resources such as “coal…and biomass into alternative fuels and clean chemicals while providing clean energy solutions.” Specifically, it is “…one of the world's leading developers of Fischer-Tropsch coal-to-liquids and gas-to-liquids technologies.” It is a chemical engineering company applying reactions known for many decades to current needs. BTU could have acquired RTK using hostile takeover warfare and not even sneeze at the cost. Management was smarter, and the two companies agreed to cooperate in developing multiple production facilities to produce diesel fuel from coal at numerous small plants close to BTU mines.
Do we have warfare-type strategies being used today? We certainly do – terrorist organizations like El Qaeda, Hamas, and Hezbollah. They are very small “companies” fighting against the mega-goliaths of the entire developed world. Am I suggesting that they will win the battle like David did? The odds make that an impossible scenario.
What I am indicating by this analogy is that business R&D and modern thinking don’t operate by mass-destruction warfare. Hostile takeovers do take place, but does any investor damage companies by killing the employees and their families and destroying vast assets? Terrorists need to wake up to the realization that they are engaging in ridiculously primitive methods in a modern world, that rational people and civilized nations will oppose that approach, and that their “enemy” has vast resources and a strong resolve to win. What a pity, however, that massive human suffering and infrastructure devastation have to take place.
As an investor, I bought into BTU when I saw that management had vision enough to pursue an important diversification and added RTK to my watch list. Did I spend $10,000 to buy 200 shares of BTU? No, I started by purchasing call options on 700 shares at much lower cost. More purchases of options and of stock may follow, but that is enough for now since we’re in a becalmed stock market, typical of the second year of the four-year presidential cycle. October will likely give us favorable winds.
INTEGRATION AND COOPERATION WIN IN A MODERN WORLD, A STRATEGY BOTH AMERICAN POLITICAL AND TERRORIST LEADERS NEED TO ADOPT.