9. Colin King on What Spin-offs Look Compelling TODAY

All right.

Well, I don't want to spend too much time.

I want to get to your stuff, but the other name that I think is interesting is Sunrise Communications.

So the basic pitch is this is a spinoff from Liberty Global and Sunrise is the number two telecom provider in Switzerland.

They're behind Swisscom and then Salt is the number three provider.

Switzerland telecom market is very stable, not much growth, a little bit of pricing pressure, but there are three providers that basically control the market.

And so it's a pretty rational market.

The thing that's interesting and the thing that got me interested and the reason why I thought that this spinoff would unlock value is because prior to the spinoff taking place, Liberty Global said, hey, Sunrise is going to pay a 333 Swiss franc dividend.

And so if you run the math and you assume a reasonable dividend yield, it was clear when this transaction was announced that the transaction would unlock value.

And this is a play that I've used in other spinoffs.

For instance, Contour Brands was a spinoff from VF Corp and the Form 10 disclosed that they're going to pay like a $2.50 dividend.

And so once Contour Brands started trading in the regular way market, it sunk like a rock.

And then you could eventually buy it at like an 8% implied dividend yield.

Whereas all the apparel peers, the highest dividend yield was like 3%.

And so once that dividend was actually declared, like the stock shot back up, we saw a similar thing when Prudential PLC spun off Jackson Financial.

Jackson Financial said hey we're going to return a ton of cash through dividends and buybacks I just assumed half of the return of capital would be dividend and you could get to like an implied dividend yield of like again it was like seven or eight percent and then when Jackson reported their first earnings results and they said hey we're going to do what we said we're going to do we're going to we're going to pay this very sizable dividend the stock reacted very favorably at the time Jackson was paying like, you know, an 8% dividend yield, whereas Bright House Financial paid zero dividend.

And then there was another annuity or variable annuity provider that paid a very small dividend.

So the relative difference between the dividend yields looked really, really interesting.

And that's been, I call it kind of the dividend as a catalyst trade where the dividends announced and then the stock free rates higher.

And so that's, kind of what I'm thinking might play out with Sunrise.

So basically Sunrise, they announced results.

The results at the end of February, the results from my perspective were consistent with what they had provided during the analyst day this fall.

The stock, they said, hey, we're going to pay out this, This dividend, it currently works out right now on the math to like a 8.2% dividend yield.

The next closest, so Swisscom pays about a 4.2% dividend.

And so the thought process is now the dividend has not been declared.