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Alexander Korda

Spinoff of its UK Business 10 Days Before the Scheduled Brexit Date

After a year and a half to structure the separation, British multinational financial services player Prudential Plc (PRU LN) has timed the demerger of its declining UK & Europe asset management, M&G Plc (MNG LN), ahead of the scheduled Brexit date on Oct 31. While there won’t be any index play due to MNG’s size, short-term negatives give pause for a pre-Spin entry but will monitor the Parent post-Spin due to its high-growth US, Asia and Africa businesses. What's Happening? Chasing the growing markets in Asia and Africa, Prudential Plc (PRU LN) is separating its declining UK & Europe asset man...

Alexander Korda

Indiscriminate Selling on Spinoff Presents Early Opportunity

In an effort to boost performance and focus on its core Healthcare and Enterprise AI businesses, Nuance Communications, Inc. (NUAN) is prepared to Spinoff its Automotive conversational AI business Cerence, Inc. (CRNC) on October 1. This is another step in a series of divestitures, which have all helped in lowering NUAN's leverage and making it a more nimble entity. Meanwhile, the Spinoff company's technicals indicate a short-term return opportunity, based on dynamics in similar prior break-ups. What's Happening? Nuance Communications, Inc. (NUAN) will Spinoff its Automotive conversational AI ...

Alexander Korda

Before You Buy the IPO, Here is What You Need to Consider

By Q1 2020, Danaher (DHR) would have completed two Spinoffs in four years with the successful Spinoff of Fortive Corp. (FTV) in July 2016. However, before DHR distributes shares of its dental segment Envista Holdings Corp. (NVST) to shareholders, it will raise $602m by IPOing 17.3% of its stake this week (Sep 18th). While we have infrequently seen this play as an alternative to a straight Spinoff, when it does take place, past transactions have reflected muted returns from IPO to Spin date. Could NVST break the trend of past IPO-Spins? What's Happening? Danaher Corp. (DHR) announced in July 2...

Alexander Korda

A Higher-Margin Small Cap Spinoff Breaks the Norm

The Ensign Group, Inc. (ENSG) will complete the Spinoff of a uniquely positioned senior living and home hospice business (to be called The Pennant Group, Inc. (PNTG)) at the beginning of October, following the same playbook as a previous REIT Spin back in 2014. While PNTG will experience some initial index selling pressure as it leaves the S&P SmallCap 600 Index, it will also be a high-margin, low leverage, and asset-light business prime for a mid-term takeover in a competitive space. What's Happening? The Ensign Group, Inc. (ENSG) has outperformed the S&P SmallCap 600 Index since its 2014 Sp...

Alexander Korda

Largest EU Consumer Internet Listing Narrows Discount, So Enter Now

Having only just completed a Spinoff in March (which has returned +30% to date), Naspers Ltd (NPN SJ) will perform another break-up next week with the listing of Prosus NV (PRX NA), the largest consumer internet business in Europe comprised mainly of NPN's 31% stake in Chinese internet giant Tencent. In a unique offering, NPN is allowing investors to elect not to receive Spinoff shares and instead increase their holding in the Parent, but our analysis shows benefits in participating in the Spin. The Edge Intelligence... Not long after completing the Spinoff of its pay-TV business MultiChoice ...

Alexander Korda

Satellites RMT Helps to Refocus Parent on High-Growth Business

Back in 2008, Dish Network Corp. (DISH) was Spun off from Parent EchoStar Corp. (SATS). In that transaction, DISH became a standalone cable broadcasting business while SATS continued to operate the satellites used by DISH and other partners, as well as the high-growth Hughes satellite internet business. Now, over a decade later, DISH will regain direct control of its nine satellites in a Reverse Morris Trust, leaving SATS with two leasable satellites and the Hughes segment. What's Happening? DISH has been the major customer of SATS’ EchoStar Satellite Services segment, accounting for 85-90% o...

Alexander Korda

Potential Shake-Up at Top-Four Agribusiness Player is One to Watch

A series of poor earnings, the abrupt retirement of chief trader Brian Thomsen, and unsuccessful takeover approaches in the past have all prompted a strategic review (announced in October 2018) at Bunge Ltd (BG), one of the top four players in the agribusiness and food industry. Other factors at play include the presence of activist investors Continental Grain Co. and DE Shaw, a new CEO and added directors, a string of insider purchases, and a potential separation on the table. What's Interesting? The Edge Intelligence... Following its October 2018 announcement of a strategic review, we exami...

Alexander Korda

Early Analysis Ahead of Lighting Spinoff Prospectus

With Eaton Corp’s (ETN) pursuit to Spinoff its Lighting business by the end of this year, analyzing previous deals, we anticipate this transaction to show similar dynamics to other S&P 500 listed break-ups. This gives investors a helpful blueprint of how both the Parent and the SpinCo can react in the initial stages of the Spinoff. Having made certain assumptions ahead of the prospectus release (as debt transfer will be a key factor), we add ETN to our current watchlist. The Edge Intelligence... Announced in March 2019, Eaton Corp. Plc (ETN) is on track for its planned LED Lighting business S...

Alexander Korda

Potential Opportunity Ahead of Prospectus, Enters MP Pre-Spin

Since its November 19, 2018 announcement, the stock price of Nuance Communications, Inc. (NUAN) has remained at the same $16 level. However, NUAN (the leader in conversational AI innovations) has been pushing forward with selling its non-core assets (like its Imaging business and its Subscription Revenue Services business) in order to help reduce its debt. Ahead of releasing its prospectus, small-cap investors should start evaluating this opportunity. What’s Happening? Nuance Communications, Inc. (NUAN), the leader and pioneer in conversational AI innovations, announced a strategic reorganiza...

Alexander Korda

Enter Parent Post-Spin and Keep IAA on Watchlist

Delayed from its Q1 2019 targeted Spinoff timing by the US government shutdown, KAR Auction Services, Inc. (KAR) is set to separate Insurance Auto Auctions, Inc. (IAA) on June 28, 2019. This is the first ever Spinoff in the field of salvaged auto auctions, and will create a pure-play insurance auction company with superior EBITDA margins compared to KAR's ADESA segment. The Spin looks fairly valued in when-issued trading, but there is significant upside in the Parent ex-Spin. What's Happening? Since the Spinoff announcement (February 27, 2018), KAR’s share price underperformed for the initial...

Alexander Korda

VFC: Value Release as it Drops Kontoor Brands

As the jeans space heats up with companies rushing to the market like Levi Strauss & Co. (LEVI), Kontoor Brands, Inc. (KTB) and The Gap, Inc. (GPS), we believe longer-term, both VF Corp. (VFC) ex-Spin and KTB look interesting as an investment. As we have seen time and again with some recent Spinoffs (particularly in the US), listing a company with debt with a short-term index play due to the Spinoff’s size is a recipe for a sell-off from its first few days of normal trading. What's Happening? The Spinoff will create a high-growth, high-margin business for VFC (Parent, ex-Spin) focused on its ...

Alexander Korda

NCR Takeover Scenario Playing Out for Investors

In what seems to be a win for investors, ATM and point-of-sale terminal maker NCR Corp. (NCR) has been approached for a takeover by private equity firms (as of yet unnamed). This pushes the stock closer to our January takeover scenario valuation, though the company has not formally committed to selling itself. Read on for more details on the previous activism attempts and our potential Spinoff/sale scenarios. What's Interesting? The Edge Intelligence... Not New to Spinoffs: TDC Performance Outlined Bleeding Hardware Segment: Significant Revenue Decline Software & Services Segments: Key Growth...

Alexander Korda

Scenarios Analyzed as Fitness/Billiards Separation Reaches Final Stages

Brunswick Corp.'s (BC) upcoming split with its Life Fitness and legacy billiards businesses, originally planned as a Spinoff, is now looking more likely to be sold instead, given current market conditions and potential value creation opportunities available to the 173-year-old boatmaker. In this analysis, we take a look at the likely valuations involved in either scenario (Spin or sale), and examine exactly what brought the company to this decision. What's Happening? The Edge Intelligence... On March 1, 2018, Brunswick Corp. (BC) announced the Spinoff of Life Fitness Holdings, Inc. following ...

Alexander Korda

Historic Split of Scandinavia’s Largest Media Group, Parent Retains Stake in Spinoff

The fast-growing online classifieds space gained a new player on Wednesday with Adevinta ASA (ADEB NO) hitting the European market following its distribution from Parent Schibsted ASA (SCHB NO). In a positive move to participate in the new company's growth prospects, SCHB plans to retain a ~60% stake in ADEB with the opportunity to monetize that stake later on. Meanwhile, both companies will benefit from industry veterans at the helm. The Edge View... Schibsted Media Group ASA (SCHB) announced the separation of its international marketplaces business on September 18, 2018, which directly resu...

Alexander Korda

Forced Spinoff Creates Post-Spin Opportunity

A.P. Moller-Maersk A/S (MAERSKB DC) has become part of the recent global trend of conglomerates divesting and Spinning off assets to focus on their core business (DWDP, NPN, NOVN to name a few). In this case, the 115-year-old Danish conglomerate will be Spinning off its drilling operations unit called The Drilling Co. of 1972 A/S (DRLCO DC) this week (April 4, 2019). What's Interesting? The Edge Intelligence... In-line with the holding family’s vision of removing oil and oil-related businesses to focus on its core Transportation & Logistics businesses, A.P. Moller-Maersk A/S (MAERSKB DC) anno...

Alexander Korda

CEO Moves to Small-Cap R&D Spinoff Reflects Confidence

The last biotech Spinoff was in June 2017 where Actelion (ATLS) in Switzerland Spun off its clinical R&D arm, Idorsia (IDIA). In IDIA’s first year, the stock doubled, significantly outperforming the healthcare index at the time. Almost 2 years later, Ironwood Pharmaceuticals, Inc. (IRWD) will be Spinning off its rare diseases R&D segment, Cyclerion Therapuetics (CYCN) on April 2, 2019. For those who can look at this small cap biotech name, we are encouraged by the fact that the CEO is going to run the Spinoff and there is an proven biotech activist in the name. What’s Interesting? With a limi...

Alexander Korda

Here's How to Take Advantage of the Peeling Onion that is DowDuPont

Anticipated by the market since the mega-merger of Dow and DuPont in 2017, the three-way split will take its first step with the separation of Dow, Inc. (DOW) on April 1, 2019. As a result, DOW will enter the S&P 500 Index (replacing MetLife's Spinoff Brighthouse Financial, BHF), and DWDP continues down its break-up path to June's distribution of Corteva, Inc. (CTVA). The Edge View... DWDP (Parent, ex-Spins): We remain positive on DWDP (ex-DOW & CTVA) considering its higher margin profile compared to the other businesses included in the combined DWDP (FY18 adjusted of 28.4% vs. DOW’s 18.3% an...

Alexander Korda

Buying Opportunity Post Spin With Novartis’ Eye Care Business

The Spinoff of the world’s largest eye-care business, Alcon, Inc. (ALC), is just one of four major strategic transactions Novartis AG (NOVN) has made over the last year, with CEO Narasimhan ramping up the focus on its core leading medicines. New numbers prompted our update to the analysis however, we believe there can be a better entry point into this situation post-Spin. What's Interesting? The Edge Intelligence... After having a connection for more than 10-years, Novartis AG (NOVN), the Swiss pharmaceutical giant, will be spinning off its previously acquired and the world’s largest eye-care...

Alexander Korda

Insider Buying at ARNC Warrants Further Investigation

Arconic, Inc. (ARNC) is on our radar for a new reason (beyond being on the Spinoffs calendar of 30 stocks): its new CEO John Plant bought $4m shares on the open market, the first significant boost to his personal shareholding at any of the companies he's led. We take a closer look at his track record, as well as the involvement of activist investor Elliott Management. What's Interesting? The Edge Ingredients... The market may not seem to like this major aluminum player in terms of total return since its split with the upstream operations (Alcoa Corp., AA) in November 2016, but by all indicati...

Alexander Korda

One-of-a-Kind Insurance Auctions Biz Receives New Valuations After Recent Filings

KAR Auction Services, Inc. (KAR) has submitted updated filings for its Spin of Insurance Auto Auctions, Inc. (IAA), which is expected for Q1 or early Q2 2019. With these new numbers, we've updated our valuations for the pre- and post-Spin entities ahead of the separation. Following the Spinoff, KAR will focus on its niche used vehicle auction services (comprised of ADESA and AFC segments), while IAA will be the first publicly traded insurance auction company on the market. The Edge View... KAR Auction Services, Inc. (KAR, Parent), a niche player in the field of online auto auctions, announced...

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