Under the Radar's: Round-Up
This week's roundup explores event-driven opportunities that could send stocks soaring.
Identifying promising investment possibilities demands continuous research and a keen awareness of change. This week's roundup delves into event-driven trades, where catalysts like mergers, activism, and asset sales can unlock significant value in specific companies.
Updates on M&A
Choice Hotels' Hostile Takeover Offer for Wyndham Hotels & Resorts: 7% Spread / ~51% annualised return. Choice Hotels made a bold move in December by launching a hostile takeover bid for its larger rival, Wyndham Hotels & Resorts. The offer ends on March 8, 2024 but could likely be a great short. (Press Release)
Genetron Holdings Limited/Management Buyout: 10% Spread/ ~54% annualised return. Chinese privatisation hinges on shareholder approval by March 31, 2024. The buyer group currently has 59.7% of voting power but must secure an additional 7.3% to close the deal. Regulatory risk still exists as approval from Chinese authorities is needed. (Press Release)
Spirit Airlines/ Jetblue: JetBlue CEO Robin Hayes will step down next month. The departure comes as the highly anticipated verdict in the antitrust case between Spirit Airlines, JetBlue, and the DOJ is on the horizon. (Press Release)
Update on Shareholder Activism and Insider Purchases
Liberty SiriusXM Group/Berkshire Hathaway: Berkshire Hathaway increased its ownership of Liberty SiriusXM Group last week. As discussed on this blog, Liberty SiriusXM currently trades at a 36% NAV discount to SiriusXM with a near-term catalyst (UR Write Up)
Sanken Electric/Effissimo Capital Management: Compelling SOTP valuation. Japan-listed Sanken Electric shares currently trade at a fraction of the value of its 52% stake in US Allegro Microsystems (ALGM US), a US-based semiconductor design company. Sanken’s core business is currently a free option. Effissimo Capital, a large Singapore-based hedge fund focused on Japan-based activism, continues to look for ways to monetise Sanken's stake in Allegro Microsystems.
Staar Surgical Co: Anatole Investment Management called on STAAR Surgical to consider spinning off its Asia or China business, arguing the standalone China business could be worth as much as $5 billion v STAAR Surgical's current $1.8B EV. (Press Release)
Spin-Offs
General Electric / GE Aerospace: GE is preparing to launch GE Aerospace as a standalone company in early 2024. With the successful divestiture of its Healthcare arm, GE will focus on three main pillars: Aerospace, Renewable Energy, and Power. While past earnings volatility stemmed from the cyclical nature of Renewables and Power, GE Aerospace offers a different trajectory. Its business leans heavily on aftermarket services ~70%. A high recurring revenue stream with attractive margins, promises a more stable and potentially lucrative future for the new aerospace company. (Press Release)
Flex/Nextracker: Flex completed the spin-off of their remaining interest in Nextracker (Press Release)
Bankruptcy Chapter 11 & 7
Audacy: The US' largest radio and podcast company, Audacy, filed for bankruptcy with $ 2 billion in debts just six months after paying executives $ 3.2 million in bonuses. (Press Release)
Core Scientific: Bitcoin miner emerging from bankruptcy. Core Scientific filed for bankruptcy in December 2022 due to rising energy prices, increased mining difficulty and bad debt lent to crypto firm Celsius. Under its restructuring plan, the company would emerge from bankruptcy with $709 million in net debt and $791 million in shareholder’s equity. The company's $55-million equity offering was also oversubscribed (Press Release)
Yellow: Currently in bankruptcy proceedings. However, Yellow achieved valuable asset sales with 21 companies buying Yellow Corps assets for a total price of $1,9bn. At the time of bankruptcy, the company had ~$1.5 billion in outstanding debt as of March 2023, of which $1.3 billion comes due in 2024 (Press Release)
Litigation
Odyssey Marine: Odyssey Marine is involved in a long-lasting litigation saga with Mexico. Although the litigation payout is uncertain, a resolution is expected in 1H 24.
Update on Other Special Situations
Paramount Global: Warner Bros. Discovery has reportedly discussed a possible merger with Paramount Global. As discussed on this blog in September 2023, Paramount is eager for a deal, and Paramount's SOTP Valuation is multiples above today’s shares price (UR Write up)
Disclaimer:
The information and opinions expressed on this blog are for informational and educational purposes only and should not be construed as financial advice, investment recommendations, or solicitations to buy or sell any securities.
Any specific advice on Spirit merger? Are you using options or just buying the stock?