Spin-off/IPO updates: Metro/Ceconomy, Brighthouse Financial, ALD SA
I had briefly written about the Metro/Ceconomy Spin-off in January. After some legal hassles, the spin-off took place last week last.
This is what I wrote back then:
With 327 mn shares outstanding, this would translate into ~6,20 EUR per share as a lower bound value for Ceconomy under my (very rough assumptions).
It think at or below this price, Ceconomy could be an interesting “Ugly duck” spin-off investment.
Interestingly, Ceconomy had a very good start, opening around 9,40 EUR and has gone above 10 EUR per share, far above my buying threshold.
Even more interestingly, the “good business”, the Metro Cash & Carry opened at ~20 EUR but then dropped quickly to a low of around 17,70 EUR as we can see in the chart:
This lead to the strange effect that the 2 parts at the end of the day were worth around -10% less than on the day before. The reason in my opinion is most likely technical selling pressure from Index investors. Ceconomy, the smaller part remains in the MDAX, whereas Metro C&C as the spin-off for the time being has dropped out (but is expected to get back in September).
Interestingly, the CEO of the spin-off announced that he bought shares for 1 mn EUR on the second day.
For me this led to a change in plans: Instead of buying the “ugly part” I bought a 3% position at ~18 EUR per share in the Cash and Carry business which in my opinion looks quite attractive (at an estimated 9x EV/EBIT).
Another observation: Although the Metro Pref shares always traded at a discount before the spin-off, after the spin-off, both pref shares (Ceconomy and C&C) trade at a small premium to the common shares. Doesn’t make sense and I cannot explain that.
With record day tomorrow July 19th, MetLife, the US insurance giant will spin-off its retail insurance subsidiary named Brighthouse Financial. The reason behind the spin-off is mostly that Metlife wants to get rid of their “systemically important” designation plus the fact that the retail business is not deemed overly attractive.
It will be interesting to see how that Spin-off performs, as again, index investors might need to sell and the business in general is not at the top of the list of most investors.
The P&L for the current year looks ugly, which clearly doesn’t add attractiveness. On top of that, the company has significant exposure to Variable Annuities which could be problematic in adverse market scenarios.
Voya Financial, the former ING subsidiary is the closest comparable stock, so it will be interesting to see if Brighthouse trades at a discount or premium to Voya. If Brighthouse trades down to a relative discount, it could become interesting as a potential “ugly duck” spin-off opportunity.
Without big advertisements, SocGen, the French bank IPOed 20% of their car leasing arm ALD a few weeks ago. Interestingly the offering didn’t go well and had to be priced at the lower bound of the initial range (14,20-17,40) at 14,30 EUR.
The stock then lost further and only recovered more recently as we can see in the chart:
I haven’t looked deeply into the company but a trailing P/E of 12 looks not too expensive for instance compared to Sixt Leasing which trades at 15,5x trailing earnings.
2 years ago, Credit Agricole did a similar structure with Asset Manager Amundi which has performed very well since then.