Spinoff Odds & Ends: Kontoor Brands, thyssenkrupp says goodbye to elevators

Time for another edition of Odds & Ends…

1. Yet Another Value Blog has a follow up piece to its initial recommendation of Kontoor Brands (KTB), the 2019 jeans spinoff from VF Corp (VFC). The company initially recovered from the usual post-spin dynamics, but has been hit especially hard this year. Interestingly, according to YAVB one reason is that it suffered another recent round of forced selling post dividend cut. Kontoor is really underperforming its peers (Levi Strauss LEVI) and the author expects that gap to narrow and the company to reinstate the dividend as soon as it can. We certainly agree that the Kontoor name is awful and wrote as much at the time. It’s just hard understand how he is OK with Tronc. Seriously?!?

2. Continuing our quest to catch up on old news from our ‘hiatus’…thyssenkrupp AG (TKAMY) agreed to sell its elevator business to a private equity led consortium for $18.7B. The buyout would be one of the largest in Europe since 2008 (shocking no?) and is led by Advent. The consortium, which also includes Cinven and Germany’s RAG Foundation, beat out industry rival Kone and, sadly for our site, the initial plan of spinning off and listing the business. The price tag was likely hard to resist.

Thyssenkrupp will become a minority shareholder in the new company by re-investing a portion of the proceeds (1.25B Euro). The remainder of the proceeds will be used to cut its debt load and reinvest in its other units. The elevator business was its most profitable business line and thyssenkrupp will now need to find a way to reverse its sagging fortunes in its remaining businesses. The deal was announced pre-pandemic so it will be interesting to see if it actually closes. In a positive sign, investors couldn’t get enough of the debt for the deal despite the weak covenants. The latest news had it on track for EU approval and a July 31st close so we will remove this from the Upcoming Spinoff table.

Feel free to share anything interesting that you’ve been reading with us.

Disclosure: Author holds no position in any stock mentioned.