Project Description

Special Situation: Ecolab / Apergy (ChampionX) Share Exchange

Recommendation: Buy 99 shares of ECL and short 2,442 shares of APY

June 1, 2020

ECL: $212.58

Market Cap: $61.5BN

Enterprise Value: $67.6BN

APY: $9.07

Market Cap: $705MM

Enterprise Value: $1.2BN

Expected return: 5.38% / $1,135

Recommendation

I’m recommending buying 99 shares of ECL and tendering them today and simultaneously shorting 2,442 shares of APY.

This works out to a profit of 5.38% and $1,135 in ~2 weeks. See the math below.

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Here is my spreadsheet which you can use to monitor the expected return.

This morning, Ecolab confirmed the exchange is on and set the final exchange ratio of 24.6667 shares of APY for each share of ECL.

Last week, I published an overview of the situation which you can access here.

Because Ecolab has confirmed the exchange ratio and hasn’t removed the odd lot provision, all risks that I can think of have been removed. Of course, perhaps there is a risk that I’m overlooking.

I personally am proceeding with the trade because I was able to short APY to hedge the transaction. If you do not want to (or cannot) short APY you could just buy ECL and exchange the shares for APY. However, you would be vulnerable to APY shares selling off while you are waiting to receive them. Of course, APY shares could appreciate as well.

One last note. If you do proceed with the trade, I would recommend calling your broker after you’ve bought ECL shares to confirm that they will proceed with the exchange on your behalf. Today is that last day that investors will be able to proceed with the exchange according to Schwab.

Disclosure

Rich Howe, owner of Stock Spin-off Investing (“SSOI”), is short APY and plans to buy ECL today. All expressions of opinion are subject to change without notice. This article is provided for informational purposes. Please do your own due diligence and consult with an investment adviser before buying or selling any stock mentioned on www.stockspinoffinvesting.com.