Landis & Gyr, the Swiss based company was on my research “to do” list for some time. Why ? Because it looked very much like a “forced IPO” special situation when in Summer 2017 then almost bankrupt Japanese Conglomerate Toshiba decided to sell Landis & Gyr which was deemed to be one of their crown jewels.
Toshiba itself had bought Landis & Gyr in 2011 for around 2 bn USD from a Private Equity Seller (Bayard) who in turn had bought Landis & Gyr from KKR (via DEMAG), another PE shop in 2004. Back then, Landis & GYr had around 390 mn EUR in sales and it was rumoured that the purchase price was quite low at around 100 mn EUR (those were the days…..).
A couple of days ago, I looked at Softbank more from a strategic point of view. This time I want to focus more on the actual assets and a sum-of-parts valuation
What is Softbank ?
Essentially the company at its core is a Telco company in Japan and US plus a lot of “extra assets” like the Alibaba stake, Yahoo Japan and then all the other stuff including the vision fund. The initial Software distribution business (this is where the name Softbank comes from) doesn’t play a big role anymore.
I will now try to walk through the major Softbank Assets in more detail:
- The Alibaba stake
Let’s start with the largest position first, the now so famous Alibaba stake. From a technical perspective, Softbank doesn’t own the listed shares but this:
One upfront comment: I promise to use the auto correct feature of wordpress.com in 2018 as often as possible. However, as I do not have unlimited time to “polish” my posts, there will be always bad grammar and bad spelling as I try to focus my available time on analyis and actual content.
Already some week ago, Swedish based “Med tech” company Getinge AB spun off Arjo AB.
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.
This is from the 2016 annual report explaining how Synchrony was separated from GE:
Disclaimer: This is not investment advice. PLEASE DO YOUR OWN RESEARCH !!!
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.
Quick Home Capital Group follow-up:
After my first post about Home Capital Group, a reader recommended to look at the KPMG report on Home Capital Group. This document can be easily obtained via a dedicated Home Capital Short Seller website hcgexposed.com which seems to be run by “famed” short seller Mark Cohodes.
I am a big fan of actually reading documents so I did read it fully (its only 20 pages).
My summary is as follows: Yes, there were serious deficiencies in HCG’s underwriting process. At its core, management emphasized volume growth above anything else and controls were not adequate.
The core issues of the “documentation fraud” is summarized as follows:
Home Capital Group is a Canadian bank/mortgage lending company founded in 1986 and run by the same CEO for 30 years, which came into the spotlight over the past few months. It ran into trouble, almost imploded and then got saved by no one other than Warren Buffett (and Ted Weschler).
There is good coverage following this link. The story in short:
Home Capital wanted to aggressively expand into insured mortgages. However at least one underwriter collaborated with mortgage brokers to get mortgages approved without proper documentation. At some point regulators reigned in but management did not tell shareholders about it. Then the regulator got tough and management had to go. In the meantime, short-term financing was pulled and the company got into real liquidity troubles.