Spin-off Links – October 2022

There has been a TON of spin-off activity.

And valuations generally look quite attractive. I don’t know when the bear market will end, but I do know I’m seeing a ton of value from a bottom up perspective.

Before we get into the spin-off news, I want to share some news. On Friday, I will launch my newest advisory: SSI: Ultra Options Advisory.

The idea is to pair options with special sits to create compelling absolute return trades.

And I’ve recruited Bruce Harper to lead the advisory.

You can get more details here.

Alright, let’s get into the latest spin-off news…

New Spin-off Announcements

Worthington Industries (WOR) announced on September 29, 2022 that its plans to spin-off its steel processing business with the expectations that the separation will be completed by early 2024.

As of 8/31/2022, on a TTM basis, “New Worthington” (the RemainCo) generated $1.39BN of sales (25% of total) and $347MM of adjusted EBITDA (64% of total). It will retain and focus on the Consumer Products, Building Products and Sustainable Energy Solutions.

The spin-off (Worthington Steel) is a steel processor and serves the Automotive, Construction, Agriculture, and Heavy Truck markets. On a TTM basis, the spin-off generated $4.1BN of sales (75% of total) and $192MM of adjusted EBITDA (36% of total).

Both businesses look quite decent but are cyclical. On a consolidated basis, the stock looks attractively valued at 6.7x forward EBITDA and 6.0x forward free cash flow. I will dig in more, but I imagine this transaction will unlock value.

Total Energies (TTE) announced on September 28th that it is planning to spin-off its oil sands operations. Management announced that the segment and assets do not align with the company’s energy transition goals.

The spin-off would include TTE’s 24.6% stake in Suncor Energy’s Fort Hills oil sands mining project, as well as its 50% stake in ConocoPhillips’ Surmont thermal project, midstream, and trading-related activities. In 2022, these assets are expected to generate $1.5 billion in cash flow.

The spin-off proposal requires shareholde