Tag Archives: Special Situation

Special situation: Whole Foods (WFM) – “free options” anyone ?

A few days ago, Amazon famously announced to take over Whole Foods Market for 42 USD per share (representing a premium of around 27%).

Markets enthusiastically welcomed this move from Amazon, with the Amazon share jumping almost 4% or ~13 bn USD, which coincidently was almost equal to the deal amount.

Whole Foods itself was “under siege” from activist investor Jana which had built up a 9% stake in the company. Just 2 days before the takeover, Whole Foods CEO called Jana “greedy bastards” indicating that he was not happy having such a shareholder.

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Special Situation Updates: Actelion/Idorsia, Gagfah, SAPEC & Stada

A lot has happened over the last few weeks for my 4 largest special situation investments:

Actelion / Idorsia

The original Actelion idea was very simple: Buy an M&A target at a small discount which is relatively safe and get something (the Idorsia spin-off) extra which no one seemed to have noticed.

Although the case played out exactly as I thought and Idorsia even seems to be worth more than I assumed, I only made around +4% on it. Not bad for around 5 months but not great either.

Looking back I think I made 3 mistakes:

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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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Sapec SA – follow up

Annual Report 2016

So now Sapec is out with their annual report for the last year (or 15 months).

The report is in French, so I am not sure if understood everything by 100% but I try to summarize the relevant issues:

  • Book value per share at year-end was 191,6 EUR
  • The operating result of the business ex the sold business is slightly negative
  • The Agro business was sold at 318,4 mn equity value, resulting in a gain of 226 mn EUR
  • They provisioned the full 36 mn Novo Bank guarantee.

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Special situation: Liquidation of KANAM Grundinvest fund (ISIN DE0006791809)

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

Background:

This investment is not an original idea, but rather a “me too” investment. Ben from Wertart has a very good write up from November last year, so I spare myself to go into too much historic description.

Just the short version: Kanam Grundinvest is one of several formerly open real estate funds in Germany which have been put into liquidation. The major difference to almost all other funds is that in the Kanam case investors actually didn’t lose any money over the lifetime of the fund as the real estate seems to have been relatively high quality. As of December 31st 2016, the fund has sold 95% of its real estate and is now effectively a cash box with some remaining real estate exposure.

So let’s focus on what has changed since Ben wrote his post:

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Special situation: Stada Arzneimittel AG – swimming with the sharks (again)

Disclaimer: This is not investment advice. please do your own research !!!

Stada is a company I had been looking at many times in the past. A business which in principle is quite good (Generics and OTC drugs) but the company was run by a long time CEO who acted as it was his own company without owning a single share. He paid himself huge salaries, employed his son in a non-sensical but highly paid job, the company afforded itself a huge corporate center and so on. As a result, the company created little to no shareholder value in the 10 years up to mid 2016. As a comparison, the 10 year return of Stada until 03/2016 was only around 1,8% p.a. compared to 7,5 % p.a. for the MSCI Europe health care index, a significant underperformance.

Then however something happened which is still very rare in Germany: A local activist investor (Active Ownership Capital) and some other funds acquired a significant stake in the company and pushed for change.

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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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