Before we get into recent spin-off news, I just wanted to highlight that I\u2019m offering a 25% off discount on <\/span>annual subscriptions<\/span><\/a> to my premium service until Friday, Feb 5 at 5pm ET.\u00a0<\/span><\/p>\n Enter code \u201csave25\u201d at checkout if the code doesn\u2019t automatically populate. <\/span>Sign up here<\/span><\/a>!\u00a0<\/span><\/p>\n Now is a great time to sign up because I just published two deep dives for subscribers:<\/span><\/p>\n Constellation Software Spin-off (Topicus.com) Deep Dive<\/span><\/a><\/p>\n Verint Spin-off (Cognyte) Deep Dive<\/span><\/a><\/p>\n <\/p>\n Recently Announced Spin-offs<\/strong><\/p>\n TechNip FMC (FTI)<\/b> announced that it is moving forward with a previously delayed spin-off. The spin-off co will be an engineering and construction company focused on the liquid natural gas market (they construct liquid natural gas floating processing facilities both onshore and floating). This company generates around $6bn in sales. The remainco, an offshore oil and gas services provider, currently generates around $7bn in sales. Ultimately, I don\u2019t think this is an especially interesting situation. Both businesses have low margins, are in a heavily cyclical industry, and are companies very similar in size (no indiscriminate selling likely). However, of the two, I think the spin-off will be more interesting given its exposure to the growing liquid natural gas market. The spin-off is going to be capitalized with $2.7BN of net cash which is quite significant all things considered.\u00a0<\/span><\/p>\n You can access my notes <\/span>here<\/span><\/a>.<\/span><\/p>\n Bluebird bio (BLUE) <\/b>has announced its intent to spin-off its oncology business. It is expected to occur this year. The remaining company is a rare disease treatment portfolio, which the company believes will be easier to focus on if the two businesses are separate. There is a belief by management that as one company, the assets or cash may not be enough to sustain multiple companies. On an unaudited basis, the cash, cash equivalents, and marketable securities have a balance of $1.3bn. While it is true that there may not be many synergies between an oncology and rare disease business, I don\u2019t necessarily agree with this view. However, the situation does not seem very actionable. I don\u2019t have an edge on this field and the company\u2019s pipeline. The spin-off will at least allow investors to pick and choose what biopharma field that interests them and the companies will not have to decide how to allocate capital.\u00a0<\/span><\/p>\n Bluebird is a $1.9 EV company with $250mm of sales. The company generates operational losses as they have struggled to commercialize one of their rare genetic disease treatments. Nick Leschly, the current CEO, will head the spin-off co.\u00a0<\/span><\/p>\n My notes can be accessed <\/span>here<\/span><\/a>.<\/span><\/p>\n <\/p>\n Recent Spin-offs<\/strong><\/p>\n Constellation Software (TSX: CSU)<\/b> announced back in September that it would spin-off Topicus.com (recent acquisition merged with TSS division). Regular way trading began on February 2, 2021 in Canada under the ticker TOI.<\/span><\/p>\n Constellation Software is a Canadian software company that grows by acquisition that has a great track record of returning value to shareholders. Constellation is primarily involved with vertical market software businesses that provide mission-critical software solutions. Topicus was originally acquired in May 2020 by Constellation. As part of the acquisition, it was agreed that Topicus.com (\u20ac101M in annual revenue) would be merged with TSS (subsidiary of Constellation) and that a public listing would be explored. The rationale for the public listing is that the founders of Topicus.com didn\u2019t want \u201ctheir legacy disappearing into the craw of an omnivorous conglomerate.\u201d Under, the spin-off, provides software for banks, healthcare institutions, and education.<\/span><\/p>\n Topicus.com has 4,250 employees in Europe split among 85 software business units. The spin-off has $464MM of annualized revenue\u00a0 (9% of total Constellation revenue) and ~$56MM of annualized net income.\u00a0<\/span><\/p>\n In initial trading the spin-off looks a little pricey for me (11.5x annualized revenue), but it\u2019s a great company and I will be watching it closely. Here is <\/span>my deep dive<\/span><\/a> (paywall).<\/span><\/p>\n On February 1, 2021, <\/span>Verint Systems (VRNT)<\/b> spun off its Cyber Intelligence business segment, <\/span>Cognyte (CGNT), <\/b>into its own, separately traded public company.<\/span><\/p>\n Cognyte has already experienced a wave of selling pressure and looks attractive. It\u2019s trading at 3.0x revenue versus its closest comp FireEye at 5.1x revenue. Or you could comp it to Palantir at 50x sales!<\/span><\/p>\n The remainco (Verint) looks interesting too. It\u2019s trading at ~5.0x revenue,a discount to its closest comp NICE which trades at 8.0x. Further, Apax Partners (well regarding PE shop) will be investing another $200MM into the company (they already invested $200MM in 2019) and so shareholder alignment will be high.<\/span><\/p>\n You can access <\/span>my deep dive here <\/span><\/a>(paywall).<\/span><\/p>\n <\/p>\n Upcoming Spin-offs<\/strong><\/p>\n DuPont (DD) <\/b>is in the process of separating\u00a0 its Nutrition and Bioscience division and simultaneously merging it with <\/span>International Flavors & Fragrances (IFF)<\/b> through a split off transaction.\u00a0<\/span><\/p>\n There was an odd lot arbitrage opportunity that <\/span>we recommended to subscribers<\/span><\/a> that has generated a nice ~$400 profit or more for those that didn\u2019t hedge out IFF exposure.<\/span><\/p>\n IFF has rallied recently due to short covering. At current prices it still looks reasonable trading at\u00a0<\/span><\/p>\n By my math, IFF is trading at 16.0x normalized EBITDA versus peers (Givaudan and Symrise) that trade at 20.0x or higher. I would have trouble owning IFF for the long term as it isn\u2019t a high growth business and is relatively expensive on an absolute basis.\u00a0<\/span><\/p>\n Here is a link to <\/span>my notes on IFF<\/span><\/a>.<\/span><\/p>\n <\/p>\n More Spin-off Links<\/strong><\/p>\n Top Picks for 2021<\/span><\/a><\/p>\n Thryv (THRY): Buy A Melting Iceberg; Get A SaaS Business For Free<\/span><\/a><\/p>\n Vimeo raises $300MM at $6BN Valuation<\/span><\/a><\/p>\n Qualtrics IPO (SAP Spin-off) Notes<\/span><\/a><\/p>\n