Odds and Ends
- I recently recorded a couple video interviews with Greggory Miller. See them here:
Recently Announced Spin-offs
On February 24, 2020, Sanofi (SNY) announced that it will be spinning off its active pharmaceutical ingredient (API) manufacturing business through an IPO in 2022. The active ingredient is the ingredient in the drug that is biologically active. The new company will have $1.2BN sales in 2022. SNY expects to IPO 70% of the company on the Euronext Paris and retain the remaining 30%. The rationale for the spin-off is that the API business could serve companies other than Sanofi and benefit from a market that is growing at 6% per year. This looks like an interesting company, but unfortunately, it won’t begin trading until 2022.
On January, 6, 2020, Emmis Communication (EMMS), spun off Mediaco Holding (MDIA). Back in October 2019, I published a quick summary related to this transaction for members. You can find it here. MDIA is a microcap spin-off that owns two radio stations in New York (WBLS-FM and WQHT-FM). Further, the company just bought a billboard asset for $43MM. MDIA trades at $5.91 with a market cap of $41MM and an enterprise value of $141MM. Management has issued guidance (page 11 of this deck) for $18.5MM of EBITDA. Thus, the company is trading at 7.6x ‘20 EBITDA, not too cheap. Standard General, a hedge fund with a good reputation in the media sector, owns 76.3% of the company and has already started buying more on the open market in the $4.50 to $5.50 price range. I will be following this one closely, but I’m not interested at the current price. As Clark Street Value summarizes, the remaining company (EMMS) is currently trading for a negative $64MM enterprise value. To me, it looks more interesting than MDIA. I don’t think I would want to own it for the long term as it’s controlled by its CEO and has a mandate to buy media assets. In other words, it’s a little like a SPAC.
On April 1, 2020, Arconic Inc (ARCN) will break up into two companies. For every 4 shares owned, shareholders will receive 1 share of a new company called Arconic Corporation. The spin-off will trade under the same ticker (ARNC). The spin-off will be focused on global rolled products, aluminum extrusions, and building and construction systems. It’s best comp is Kaiser Aluminum (trades at 7x forward EBITDA). The remaining company will be renamed Howmet Aerospace and will trade under the ticker HWM. Its best comp is Precision Castparts, a company that was acquired by Berkshire for 13.3x EBITDA. Ahead of the break-up, ARNC looks very interesting trading at 6.8x EBITDA.
More Spin-off Links