Under the Radar's: Round-Up
Under the Radar's: Round-Up
This month'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 month’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
M&A activity surged in January 2024, with a combined value of $137 billion in announced US deals. This strong start suggests a potential rebound for the M&A market in 2024.
Paramount Global: Byron Allen Makes $14 Billion Offer for All of Paramount Global. As discussed on this blog in Q3 2023, Paramount is eager for a deal, and Paramount’s SOTP Valuation is multiples above today’s share price. See (UR Write up). PARA B Shares currently trade at a 54% discount to the preliminary offer price. PARAA A Shares trade at a 31% discount. Skydance Media may spark a bidding war for Paramount with its potential offer. (UR Write up).
Genetron Holdings Limited/Management Buyout: 6% Spread/ ~49% 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. The company will hold an extraordinary general meeting on February 21, 2024, to vote on the transaction. Regulatory risk still exists as approval from Chinese authorities is needed. (Press Release)
iRobot/Amazon: Amazon and iRobot have mutually agreed to terminate their $1.7 billion agreement to acquire the maker of Roomba robot vacuums. Noting the deal has “no path to regulatory approval” in the European Union. (Press Release)
Mergers and Acquisitions Off To Strong Start in 2024: Key Deals So Far
Software Giants Merge: Synopsys and Ansys combine in a $35 billion deal, shaping the future of software development. (Press Release).
HP Acquires AI Powerhouse: Hewlett Packard scoops up Juniper Networks for $14 billion, bolstering its artificial intelligence capabilities. (Press Release).
BlackRock Bets Big on Infrastructure: Investment giant BlackRock aims to create the world’s leading infrastructure firm with a $12.5 billion acquisition of Global Infrastructure Partners. (Press Release)
Energy Consolidation: Chesapeake Energy and Southwestern Energy merge, forming the largest natural gas producer in the United States in a $11.6 billion deal. (Press Release)
Sunoco Expands Pipeline Network: Energy firm Sunoco acquires NuStar Energy for $7.3 billion, marking the second-largest energy deal of the year. (Press Release)
Update on Shareholder Activism and Insider Purchases
Liberty SiriusXM Group: Berkshire Hathaway continued to increase its ownership of Liberty SiriusXM Group last month. As discussed on this blog, Liberty SiriusXM currently trades at a 40% NAV discount to SiriusXM with a near-term catalyst see (UR Write Up) or (Liberty Hedging Strategies).
Nb Bancorp (NBBK): Thrift conversion with numerous insider purchases following NB Bancorp’s demutualisation (Press Release)
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 sizeable Singapore-based hedge fund focused on Japan-based activism, continues to look for ways to monetise Sanken’s stake in Allegro Microsystems.
BJ’s Restaurants (BJRI): Fund 1 Investments is an active investor in the casual dining restaurant and believes there are “operational and strategic opportunities to maximise value”. Fund 1 now owns a 9.5% interest in the restaurant chain and is keen to explore “strategic alternatives” as BJRI could be an acquisition target for many parties. (Press Release)
Alibaba: Alibaba surges after Jack Ma and Joe Tsai buy $200M of company stock. Shares currently trade near the IPO price, set back in September 2014. (Press Release)
Spin-Offs
General Electric / GE Aerospace: GE is preparing to launch GE Aerospace as a standalone company in April 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)
Bankruptcy Chapter 11 & 7
Yellow Corp: Currently in bankruptcy proceedings. However, Yellow achieved valuable asset sales with 21 companies buying Yellow Corps assets for $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. The debtor’s financial advisor expects there to be a recovery for the equity holders. (Press Release)
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.