Recent/Imminent Members Only Research

Ensign Spin-off (Pennant) Deep Dive (September 30 publish date) 

Nuance Spin-off (Cerence) Deep Dive

AECOM Spin-off Quick Summary

Golar LNG Spin-off – What’s It Worth?

Madison Square Garden Spin-off – Deep Dive

Kontoor Brands – Deep Dive


Recently Announced Spin-offs

On September 3, 2019, CNH Industrial (CNHI), a global industrial company focused on farm and construction equipment, announced that it would spin off its truck business in 2021 into a separate company with revenue of $13BN. The remaining business will include the tractor business, the construction equipment business, and special vehicles (such as firefighting trucks); it will generate $16BN of revenue. The driver behind the decision is limited synergies between the two groups. Further, agg equipment companies trade at higher multiples than trucking companies. For instance, Deere trades at 17x EBITDA, significantly higher than CNHI.

On June 17, 2019, AECOM (ACM) announced that it would spin off its Management Services (MS) unit. The parent company, AECOM, is one of the world’s top engineering and design groups. The unit that is to be spun off encompasses all of AECOM’s Government Services work, generating an estimated $4BN in revenue for FY19, according to management, representing just under 30% of total ACM revenue.The clear reason for the spin-off is to unlock value for AECOM shareholders. Government Services businesses are valued by the market at a significantly higher multiple (15x EBITDA)  than more vanilla Engineering and Construction (“E&C”) businesses (11.0x EBITDA). I published additional details on the spin-off here (members only). 


Recent Spin-offs

Echostar (SATS) recently completed its spin-off and merger of its Satellite business with Dish Network (DISH). Echostar shareholders received ~0.24 of a share of DISH Class A common stock for each share of SATS that they own. The transaction will allow SATS to focus on its broadband services and will enable DISH to enter the US wireless market. This is very interesting from a strategic perspective, but I don’t have a deep enough industry knowledge of the wireless industry to have a high conviction opinion on DISH.


Imminent Spin-offs

The Ensign Group (ESNG) announced that the spin-off of its home health and hospice agencies will occur on October 1, 2019. The spin-off will be named The Pennant Group and is expected to trade under the ticker PNTG. The RemainCo will focus on the skilled nursing industry. I published an overview of the opportunity here (members only). It will be an interesting opportunity as the market cap of the spin-off will be ~15% of ENSG. As such, there could be indiscriminate selling and an interesting opportunity. I will publish my deep dive on the spin-off on September 30, ahead of regular way trading on October 2.

Nuance (NUAN), a speech recognition software company, will spin-off its auto focused business (named Cerence) to investors on October 1, 2019. The spin-off will be a higher growth automotive technology company. The remaining company will retain the healthcare and enterprise segments. The spin-off is expected to generate $309MM of revenue (~16% of total revenue). Cerence could be interesting as it is a small cap spin-off, is growing (8% organic growth in the quarter), and generates positive free cash flow. Nuance shareholders of record as of September 17th will receive 1 share of Cerence for every 8 shares of Nuance owned. Regular way trading will begin on October 2, 2019 under the ticker CRNC. I recently published a deep dive on the opportunity here (members only). Regular way trading begins on October 2. 


More Spin-off Links

Washington Post: Sony’s Spinoff Snub Shows Activist Investor Loeb Was Right

CNN: AT&T Pressured by Elliott to Spin-off DirecTV 

Seeking Alpha: Cerence Starts When Issued Trading

Seeking Alpha: Perspecta Looks Attractive

Business Times: Naspers spins off Prosus

Seeking Alpha: Invest in Prosus to Get Exposure to Naspers

WSJ: Carrier’s New CFO to Guide Spin-off

Seeking Alpha: CNH Spin-off to Unlock Value

Seeking Alpha: Top Idea is Golar LNG

Seeking Alpha: Good Interview with Boyar Value Group