Stock Spin-off Links

Recently Announced Spin-offs

On November 5, 2018, FMC Corp (FMC) a chemical company focused primarily on the agriculture market, announced that it would spin off its remaining ~85% stake in Livent (LTHM), its pure-play lithium subsidiary, on March 1, 2019. FMC previously sold ~15% of LVTH in an October IPO. It priced at $17 and is currently trading at ~$12.91.

On December 6, 2018, Mallinckrodt (MNK), a pharmaceutical company, announced that it was going to spin off its generics business. MNK has tried unsuccessfully for two years to sell the business. The generics business accounted for $862MM of revenue of a trailing twelve month basis (27% of sales). It is primarily focused on selling opioid drugs which have been under pressure recently due to their addictive nature and the dramatic increase in opioid related deaths.  MNK faces several lawsuits that accuse the company of contributing to the opioid epidemic through its marketing practices.

Recent Spin-offs

BGC Partners (BGC) spun off its ~85% stake in Newmark Group (NMRK), a real estate advisory firm, on December 3rd. NMRK originally IPO’d ~15% of its shares at $14/share. It is currently trading at ~$7.94.  NMRK’s competitors are CBRE, JLL, CIGI, and WD which trade at 8.3x ‘19 EBITDA. NMRK is trading at 7.3x ‘19 EBITDA. I posted additional thoughts here (for members).

Imminent Spin-offs

Netgear (NTGR) will distribute its remaining 62,500,000 shares of Arlo Technologies (ARLO) on December 31, 2018. As a reminder, Netgear proceeded in August 2018 with a partial IPO (11.77MM shares) of its Arlo division which is focused on smart video cameras. ARLO is down 40% from its IPO price. ARLO looks relatively interesting. It trades at 0.8x ‘19 sales. Competitors, Dropcam (acquired by Google), Nest (acquired by Google), and Ring (acquired by Amazon), were acquired at 8.3x forward sales, 6.9x forward sales and 3.3x forward sales, respectively. However, do Amazon, Google and other major tech players need to acquire another player when they are already established in the space? Also, ARLO will be facing steep competition from Amazon and Google (and their billions) going forward.

Spin-off News and Links

United Technologies (UTX) recently announced that it will be breaking up into three public companies. I recorded a video to walk through my analysis of the situation. The stock looks like its trading at about a 14% discount to its break-up value. However, if you give UTX credit for certain upside scenarios ($500MM of Rockwell Collins synergies, the elimination of Geared TurboFan engine losses, and a premium multiple), there could be 46% upside. Check out the video here.

On June 27, 2018, Madison Square Garden (MSG), announced that it would explore spinning off its sports business (New York Knicks and Rangers). The company later confirmed that the spin-off would happen in the first half of 2019. The investment case for MSG has always been that it trades at a discount to its net asset value and the spin-off should help narrow the discount. I estimate that MSG is trading at a 24% discount to its net asset value. I posted my analysis here. In it, I also explore why the company is well positioned from a secular and cyclical perspective: 1. Live sports and entertainment are immune to cord cutting and 2. Sports are recession resistant.

Need a last minute Christmas Gift

Give the gift of spin-offs.