Search Results for: spin-off

Siemens Energy AG Spin-OFF – ANother Interesting Member of the “Ugly duckling Spin-off Family” ?

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Disclaimer: This is not investment advice !!! PLEASE DO YOUR OWN RESEARCH.

At first a big “health warning”: My track record with Spin-offs is awful although I dedicated significant efforts into this area. Over the last years, I missed out on several good ones (Uniper, Trisura, Osram) and I unfortunately invested in a few bad ones (Cars.com, Metro). My best spin-off investment so far was Italgas.

Siemens Spin-off history

Siemens itself is an interesting case, as under (soon to be former) CEO Joe Kaeser, and even before, they are one of the few German companies that use spin-offs more or less frequently. Over the years, Siemens has spun off for instance Quimonda (bankrupt), Infineon (has recovered quite well), Osram (taken over by AMS) and Siemens-Gamesa (very volatile but strong performance lately). Overall I would say that on average the Siemens Spin-offs did very well despite being mostly “ugly ducks” at the time of spinning off. Siemens Healthineers in comparison was not an ugly duck (despite the stupid name) and that’s why they actually IPOed it.

Siemens Energy AG Spin-off

This is the latest spin-off from Siemens, spun-off on September 28th with a first price of around 22 EUR, a lot lower than initially expected. As we can see in the chart, the shares dropped at first but now recovered to the initial level in line with Siemens AG and the DAX:

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Synchrony Financial (SYF) – a Spin-off that is better than its Parent GE ?

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While looking at General Electric some days ago, I remembered that I had the IPO/Spin-off GE Capital Credit Cards which is now Synchrony Financial on my research list for quite some time.

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Company Background

This is from the 2016 annual report explaining how Synchrony was separated from GE:

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Cars.com (CARS) – Interesting spin-off opportunity ?

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Disclaimer: This is not investment advice. PLEASE DO YOUR OWN RESEARCH !!!

 

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Cars.com is a recent (May 31st) spin-off from publishing company Tegna, which itself is a spin-off of the Gannet publishing Group. Interestingly, Gannet/Tegna only bought control of cars.com in 2014 for a total value of 1,8 bn USD.

Cars.com – The business & Market

Cars.com is a typical “Online classified” business, meaning that it collects offers of merchandise (in this case cars), aggregates and sorts them and then shows it to as many potential customers as possible.

The economic value of such a “service” is relatively easy to explain: For a potential customer, it saves time because he can look at and compare different offers at one place. For the sellers, such a service is basically an advertising and/or sales channel which ideally reaches many potential customers.

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Trisura (TSU) – Interesting spin-off opportunity or intransparent minority mess ?

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trisura

A friendly reader had mentioned Trisura as a potential Spin-off opportunity in the comments and the stockspinoffinvesting blog mentioned it a few days ago  and linked to a  Seeking Alpha write-up.

At first sight, Trisura indeed looks interesting:

  • it’s a small cap specialty insurer currently mainly active in Canada
  • it hasn’t been “discovered” by sell side analysts yet
  • only mini spin-off dividend for Brookfield holders (1 Trisura stock for 170 Brookfield stock(~0,3%)
  • the company has been growing very quickly over the last few years

This is from the listing prospectus:

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Spin-off/IPO updates: Metro/Ceconomy, Brighthouse Financial, ALD SA

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Metro/Ceconomy

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.

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Spin-off watch: SCA / Essity

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One of the biggest and highest profile Spin-offs in Europe this year is clearly the separation of Swedish SCA (“Svenka Cellulosa Aktiebolget”) into an “integrated forest product group” which keeps the SCA name and a consumer product entity named “Essity”.

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SCA communicated this already more than two years ago and starting this week, June 12th the spin-off is actually executed, with every SCA shareholder receiving one Essity share per SCA share.

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Actelion (CH0010532478) – Merger arbitrage with a potential Spin-off “Gold Nugget” ?

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Yesterday, Johnson and Johnson announced that they intend to acquire Actelion, the Swiss Biotech company for 280 USD per share.

The stock price jumped to around 272 CHF/USD right after the announcement indicating a relatively high probability of closing. J&J has enough money on their bank account and according to the press, most Actelion shareholders should be happy.

Closing date is targeted as June 30th. So if everything goes according to plan, this would mean ~2,9% yield for 5 months which is not bad but not that great either (as there are always risks) , so why bother ?

However there is an interesting specialty in this case which I didn’t see when I first looked into it. The official announcement contained this potential “golden nugget”:

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Spin-offs: Uniper – Goal for Einhorn, Metro AG/Ceconomy – complicated but maybe interesting ?

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Uniper /E.On Spin-off

In David Einhorn’s latest letter to investors he mentions the following:

We purchased E.ON (Germany: EOAN) in the fourth quarter of 2015. When EOAN spun out Uniper (Germany: UN01) in September, we kept the UN01 shares we received at €10.02 in thetransaction and sold the balance of our EOAN stake at a modest loss to redeploy that capital into additional UN01 shares. We believe the market does not appreciate the earnings stability o fUN01’s power generation and natural gas logistics assets. Further, the incoming management team is incentivized and has committed to cost-cutting, which will create a powerful cash flow profile. We own the company at 6x our 2017 earnings estimate.

So looking back this was a smart move. Although Uniper’s stock price came back a little bit, Einhorn is still up like 35% and has done clearly better than holding on E.On:

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Gocompare.com (GoCo) – Another Spin-off that became a “Trump victim” ?

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The Company / Spin-off

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Gocompare.com (GoCo) has been spun-off from parent Esure in the beginning of November, a week before the US elections and only a few days before Italgas SpA. As a “parting gift”, Esure took out a special dividend of about 75 mn GBP financed by some net cash and a 70 mn GBP loan before spinning the company off-

In my understanding, the major reason for the spin-off was that Esure, the listed UK online direct insurer was short in solvency capital and that this transaction improved the solvency substantially.

Every Esure investor got one GoCo share for an Esure share. Interestingly, Toscafund, the second largest shareholder only holds 14% in Goco compared to 16,7 for Esure, so they seem to have sold some shares.

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Italgas SpA (ISIN IT0005211237) – Spin-off special situation meets contrarian opportunity

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Management Summary

As this turned into a pretty long post again, quickly the highlights. I do think that Italgas SpA, the recent Spin-off from SNAM SpA represents a potentially interesting special situation investment because:

  • overall sentiment towards Italy is really bad (“Renzi referendum”)
  • the Spin-off was not timed well just a day before the US election
  • the current uncertainties within Italian regulation changes further deters potential investors
  • all this is reflected in asset multiples at the very low-end for comparable regulated assets

For those reasons I initiated a 2,7% position for my portfolio for my “Special Situation” bucket.

DISCLAIMER: This is not investment advice. Please do your own research !!!!

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