Leader in Flow Control Business Exhibits 30% Post-Spin
It’s been over 6 years since Finnish investors have witnessed a corporate break-up and next week, Metso Corp. (MEO1V FH) will be back once more to split again. After a successful Spinoff of Valmet Corp. (VALMT FH) in 2014, which jumped +45% in its first year, Metso will be Spinning off its Minerals business to merge with another industrial player, Outotec Corp. (OTE1V FH) while the RemainCo (to be renamed Neles Corp) will be a pure-play Flow Control Business.What's Happening?
Metso Corp. (MEO1V FH) is performing a unique spin of its Minerals business by combining it with another industrial player in the mining and minerals industry, Outotec Corp. (OTE1V FH). The RemainCo (Flow Control division) will operate as a pure-play entity and will be renamed Neles Corp. (NELES FH). It will be a strong niche participant in the valves market with well-diversified customer segments (oil & gas, pulp & paper, chemical industries). Meanwhile, the Spin-merged entity will be called Metso Outotec Corp. (MOCORP FH) will consolidate its position in the highly competitive minerals, metals and aggregates industry.
The Edge View...
NELES FH: Post-Spin, Neles Corp. will be a pure-play flow control business (making industrial valves regulating flow of fluids in industrial activities) with enviable profitability, niche market targeting and industry-leading leverage position. Neles also holds a leadership position in pulp & paper valves, along with its leadership in the pulp & paper industry. Likewise, the company does not depend on its customers’ capex, which reduces vulnerability to its end markets’ capital investment cycle. Neles’ near-zero leverage profile shows it has a favorable position with respect to cash-conserving abilities.
MOCORP FH: The merging of MEO1V’s minerals and mining division with OTE1V will assist in consolidating its market share in a competitive space. Combining MEO1V’s flexible operating model with OTE1V’s backlog presents an opportunity for the business to gain further traction in the global mining and mineral process equipment market. With limited leverage on its balance sheet and improved profitability due to higher contribution from services revenues, we believe the Spin-merged entity will close the valuation gap with its peers and lead to upside for investors.
Outotec is a global provider of process solutions, technologies and services for the mining and metallurgical industries organized in four divisions. The Minerals Processing division provides concentrator plants, process solutions and services for ore concentration, the minerals and fertilizer industry, energy sector and water treatment. The Base Metals division provides metallurgical processing technology for copper, nickel, zinc, precious metals and ferroalloys. The Metals Processing division develops and supplies technologies and services for the production of iron, alumina, aluminum and synthetic rutile. Larox develops and delivers industrial filters for separating solids from liquids.
Metso is a global services, products and systems provider. Co. serves its customers in mining, oil and gas as well as aggregates industries. Co. serves also some other process industries, such as pulp and paper industry. Co.'s offerings to the mining industry include grinding mills, mill linings and grinding media; as well as crushers and screens. Co.'s offerings to the aggregates industry include crushers; as well as screens, feeders and conveyors. Co.'s offerings to the oil and gas industry include control valves, on-off valves; intelligent safety valves; intelligent valve controllers and limit switches; intelligent field services; spare and wear parts; as well as performance services.
The Edge Group - Global Fundamental Catalyst Investing. The Edge provides investors with access to hidden corporate value from Global Special Situations using a pioneering approach to investments. Founded in 2005 by fund management and investment banking professionals to provide high quality, private equity-level research on Global Corporate Divestitures for the benefit of fundamental event-driven, growth and value-oriented investors in this difficult to track, but proven investment space.
The Edge will look to screen and analyze include Spinoffs; Reverse Morris Trusts; Squeeze Outs; Privatizations; Demutualization; Deep Discounted; Rights Issues; Rights Offering; Restructuring; Insider Purchases / Buying Change of Management / CEO Change; Deteriorating fundamentals; Post-Bankruptcy; Reorganization; Tender Offer; M&A Deals; Secondary Offering; Share Swap; Thrift Conversions; Share Buybacks; Activist; Mergers. All analyzed from a fundamental point of view.
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