Kevin Buyn - Denali Investors Columbia Business School 2009
Kevin Buyn - Denali Investors Columbia Business School 2009
Kevin Buyn - Denali Investors Columbia Business School 2009
+ + =
CAH CFN
Thesis:
Buy ParentCo, and get SpinCo for very cheap
Deal Background
Summer 2009 - CAH was trading at $30 - $31 per share
CAH was still expected to close the spin in Q3 2009
1
2
Valuation
Capital structure
Quality business
Institutional ownership
Management incentives/ownership
Fundamentals
Ways to Place an Investment
Pre-spin
Play the break up value
- Via equity or options
- Many possible scenarios, so consider ‘long strangle’
position (very attractive…)
Post-spin
Buy CAH on the cheap
Buy CFN on the cheap
- Via equity or options (time arbitrage/LEAPs)
Pricing has moved more for CAH than CFN and upper range of
expected value creation ($5 - $10) has been reached…
So What Happened?
- Pre-spin investment
- Outcome agnostic 3
- Greenlight files soon after 2
- Last week Barron’s article 1
Events
Catalysts
Insurance at work
3
OUTCOME
KCFLG: $1.20 to $8.50 [+$7.20]
KCFXE: $0.50 to $0.00 [-$0.50]
Net Gain/(Loss) = +$6.80
* Figures per contract
Review
Intersection of Value + Spec Sits + Options…
Spinoffs
Inefficiency built into the system V
Valuation
Options / Hedges
Survive
“The Ratio”
Downside protection! SS O
An Election Merger
GW PDS
Deal Background
Precision Drilling (PDS) buys Grey Wolf (GW)
1 2
Review
Special situation
Optionality… that’s free
V
Hedging (Insurance)
“The Ratio”
Survive
Market agnostic
SS O
MSG:
- Concentration in NYC
- Discretionary dollar spend
- Capex (MSG renovation)
Live Situation #2
Pharmaceutical Product
Development, Inc. (PPDI)
Spinoff of
Compound Partnering
Business (Ticker TBD)
SpinCo:
- Fundamentals
- Follow the management
- Cashflow?
- Precedents are instructive (FACT and MYRX)
Looking Forward
H. Kevin Byun
[email protected]
Thank You
+ + =