Category Archives: Spin off

HP Enterprise (HPE) – Spinning-off its way to happiness ?

DISCLAIMER: THIS IS NOT INVESTMENT ADVICE. PLEASE DO YOUR OWN RESEARCH !!!!!

Management summary:

  • HPE, the enterprise arm of the old HP looks attractive on a sum-of-part valuation
  • following 3 spin-offs in 2 years, my model indicates an upside of ~40% in the base case and ~70% in an optimistic case
  • Some “soft catalysts” are on the horizon such as the upcoming Software “spin -off merger”, further share buy backs and a “normal” financial year
  • management acts shareholder friendly, has a clear strategy and has created significant shareholder value since 2011
  • major risk is clearly a further detoriation of the Enterprise solution business which had a bad start into fiscal 2017

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Spin-off watch: SCA / Essity

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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Italgas SPA (ISIN IT0005211237)- follow & SELL

People who follow my blog for some time know that timing of purchase and sales of stocks is not one of my strengths. I usually buy too early and sell too early. Italgas is one of the very rare exceptions:

When I looked at Italgas and then bought it end of November, I really managed to buy at or very close to the absolute low after the company had been spun off.

Looking at the stock chart we can see that Italgas outperfomed the broad index (lower blue line) but mostly mirrored the Italian small cap index with a slight outperformance if we consider the dividend which was paid early this week (0,20 EUR/share).

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

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 ?

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

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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Uniper/E.On Spin-off: Take one ugly duck and transform it into ….. 2 really ugly ducks ?

Background:

Monday, Sep 12th will be the first trading day for Uniper, the E.On spin-off. E.On shareholders will get one Uniper share for each 10 E.On shares they are holding.

Just to recap: Uniper will contain all the (unwanted) power generation assets of E.on, so all the “fossil fuel” power plants, the Russian assets and the Swedish nuclear plants plus some other stuff. The German Nuclear assets (and the corresponding liabilities) will remain at E.on due to the reasons I mentioned in the last post.

Uniper is clearly an ugly Duck, maybe the “most ugliest spin-off” I have seen since I started the blog. If we look into the most recent investor presentation, it is clear that you have a problem when the 3 listed growth projects are a German Hard Coal Power plant, q Russian power plant closed due to an accident which will reopen in 2018 and some strange dealings around the North Stream gas pipeline (page 9.). It doesn’t help either that Uniper had to take a 3,8 bn EUR pre tax write down in the first 6 months of 2016.That makes the duck still uglier.

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