Event-Driven Investments Binder #2: SPG, IRE.AX, JOBS, ULE.L
Special Situations
The Uranium trade I've mentioned last week is moving in a positive direction so far. Sprott announced a new $1bn ATM program. I did a bit more digging on this case - it is definitely a much more complex industry than it seems at the first glance, so I am not that sure if the squeeze can really work out as expected. The Uranium squeeze thesis has already been communicated widely in investing world and just sounds too simple and too good to be true. On the other hand, 2021 events so far denied rationality many times already, so maybe this one will join the gang as well. I'll be definitely looking at the upcoming SRUUF NYSE uplisting.
Spectrum Brands has just announced the sale of its largest division at $4.3bn gross proceeds. The company intends to significantly reduce debt and after that will be sitting on about 42% of the market cap in cash. That cash will flow into growth and capital return to investors. Pro-forma SPG trades at just over 8x LTM EBITDA and management has previously hinted many times that the stock is cheap. Large tender or buyback announcement is expected in the short term.
JOBS privatization is likely to close by the end of 2021. Few months ago the spread on this transaction stood at almost zero as markets were certain on succesful closure. However, the spread has been on a rollercoaster recently driven by the general Chinese stock declinse and possibly some fears that Chinese financiers could withdraw. Spread fattened to 16% in mid-August, and then slimed down to 3% last week before widening again to 10% without any company-specific news. The regulatory risk seems to make sense, however, the current widening may be interesting for some quick and small swing trades.
Coinshares International - a thread from Ian Hunter - CS.ST is a crypto ETF manager, which also does some proprietary crypto trading on its own. Trades at 4x YTD run-rate P/E. Shares are depressed due to a number of various minor overhangs. Management owns 45%. Could be ripe for an activist to step in. The company is very young and very interesting, but at this point, I am not sure what could forward earnings look like as both businesses are very volatile and heavily dependent on the overall crypto market doing well. Not sure about the activist too, as this is Sweden and management owns 45%.
Classic Merger Arbitrage
IRE.AX - Private equity fund EQT has been attacking Iress IRE.AX with non-binding offers with the latest one coming at A$15.75/share. Due diligence has been granted and recently extended till next week. The spread has widened lately as the market fears the results of DD. Non-binding offers in Australia are naturally a danger zone. However, given the limited downside and the offer that has already been sweetened twice, I think this is worth a bet.
RFC.V - Rifco is getting taken private by its management at C$1.15/share. This is a very small and illiquid Canadian auto lender, but if one manages to grab some shares at the current level, there's a 7.5% spread. The deal should close next month so the IRR is attractive. Downside to pre-announcement is 16%, but the deal is likely to close as the timing seems opportunistic amidst the booming auto lending industry.
ULE.L - UK defense sector deal with 11% spread - aerospace firm Cobham is buying major Royal Navy supplier Ultra Electronics at 35 GBP per share in cash. The deal is messed up from the regulatory standpoint as Cobham is actually controlled by the U.S. PE firm Advent after the controversial takeover last year. National security and antitrust probes are in effect, but Cobham pleads that it will enter into any necessary commitments to secure ULE's services to Her Majesty's government. This seems a bit too much for me at this risk/reward but could be worth tracking.