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:
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.
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.
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:
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”.
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.
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).
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”:
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: