Time to Buy Mantowac? Special Situation Investing News - 8/12/2015
The featured idea for today's Special Situation Investing News has it all, a major selloff, an impending spinoff and activist investors. The company that I am talking about is Manitowoc $MTW.
Let's talk about the special situations in the order that I mentioned them. First, the selloff. Manitowoc's stock has underperformed the S&P 500 by nearly 43% over the past twelve months:
A one-year chart of $MTW (blue) vs. the S&P 500 (red) (click to enlarge)
Ouch. As a value investor at heart, the more stocks sell off, the more I become interested.
The second special situation here is a spinoff. In January of this year, Manitowoc officially announced that it will spin off high-margin foodservice business as an independent company, leaving the more cyclical crane manufacturing business with the former parent.
The third and final special situation here is the involvement of a number of activist investors. Manitowoc is yet another example of the phenomenon that we have seen numerous times lately, multiple activist investors attacking the same company. With $MTW, first Carl Ichan and a pre-Ralph-Whitworth-health-issue Relational Investors took large positions. In June, they were joined by Larry Robbins’ Glenview Capital Management. Collectively these activist investors control more than 20% of Manitowoc's stock.
This large voting stake and board seats give the activists a tremendous amount of influence over the direction of the company. Speculation has begun to surface that they will push for a sale of the its foodservice division after it has been spun off. According to a recent article on The Deal's blog:
"In its settlement with Icahn the company agreed to a number of governance provisions for the new foodservices company that could make it easier to be sold. Annual board elections, a poison pill threshold limited to 20% and a provision allowing shareholders owning 10% of the outstanding shares to call a special shareholder meeting, are all shareholder-friendly provisions that make it easier for a change of control to take place. Plus, Icahn’s general counsel, Jesse Lynn, was installed on Manitowoc’s 10-person board in April. Expect Lynn to keep a watchful eye on the company and possible strategic options down the road. (Lynn did not return calls seeking comment.)"
Robert W. Baird analyst Mircea Dobre's recently came out with a sum-of-the-parts estimate (I love these) for $MTW of $25/share, significantly higher than the company's current share price of $17 and change.
I do not currently own $MTW, but as the spinoff approaches I may decide to purchase one or both parts of the company.
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