Flex Nextracker Spin-off Notes

November 2, 2023 Update

On October 25, 2023, Flex Inc (FLEX) announced that it is going to spin-off its 51.47% stake in Nextracker (NXT) by March 31, 2024.

FLEX IPO’d NXT earlier in 2023 but maintained a majority position in the company. The situation is interesting because FLEX trades at 5.9x forward EBITDA while NXT trades at 11.1x EBITDA. So the transaction should unlock value.

Let’s take a step back. What is Nextracker? It is a leader in the solar tracking industry. NXT’s products enable solar panels to follow the sun’s movement across the sky. Solar trackers generate up to 25% more energy than projects that do not track the sun.

RemainCo is an outsourced electronics manufacturer. Here is a good article on the electronics manufacturing industry including Flex’s main competitors.  This is a good article from VIC that provides the basic investment case for Flex. I published this research at the time of Nextracker’s IPO. At a high level, this situation looks interesting and compelling because Nextracker’s best comp (ARRY) trades at 12x EBITDA (vs. NXT at 11.1x) and RemainCo’s best comps (Foxconn, Wistron, and Jabil) trade between 6.6x and 9.1x forward EBITDA. FLEX currently trades at 5.9x.

Here are some notes from an October 25, 2023 conference call: