Spin-Off Research In the News

Beware Complacency: Markets and The World Economic Place

Posted by Joe Cornell, CFA on Mon, Sep 24, 2012 @ 12:09 PM

Barron's Spin-Off, Joe Cornell, Spin-Off Research, Spin-Off Advisors, Spin-off, ipo, spinoff, carve-out, Hyster-Yale, Nacco





Newsletter writers grow more bullish, but corporate insider sales outnumber buys by six to one. Plus: the case for Nacco Industries.

MARKETS AND THE WORLD ECONOMIC pace have not stayed firm enough for long enough for the much-predicted rebound in corporate mergers to arise. Company bust-ups, however, continue to enrich investors.

The Bloomberg Spinoff Index is up more than 30% so far this year and the Guggenheim Spin-Off exchange-traded fund (ticker: CSD) has climbed 19%. As noted in a favorable item on companies cut loose by their parent here March 5, the ETF is a bit flawed because it doesn't pick up spinoffs until they have been independently trading for six months, after which they've often been discovered and bid up.

In a week, shareholders of the $1 billion market-value mini-conglomerate Nacco Industries (NC) will receive shares in forklift maker Hyster-Yale Materials Handling, which represents the majority of Nacco's value. The remainder of Nacco will continue to own a coal producer, the Hamilton Beach small-appliance division, and the Kitchen Collection gourmet retailer.

Despite this collection of familiar brands, the family-controlled Nacco is only minimally covered by Wall Street. Nacco shareholders of record as of Sept. 25 will receive a share of Hyster-Yale for each Nacco share owned, and both will begin trading separately Oct. 1. Joe Cornell, analyst at Spin-Off Advisors in Chicago, is bullish on Hyster-Yale, in part because the spin will allow it to participate in industry consolidation.

Using sober assumptions and comparable-company valuations as a guide produces a sum-of-parts value for Nacco following the spin at between $140 and $165 a share, up from Nacco's Friday closing level of $112.48.

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Barron's: Beware Complacency: Markets and The World Economic Place

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Barron's: Beware Complacency: Markets and The World Economic Place

Tags: Nacco Spin-Off, NC Spinoff, Hyster-Yale Spinoff, HY Spinoff