HEICO (HEI), mcap=$18.8bn, price $156 vs $133

– 25% arb spread between Heico common and class A shares.
– Expected to narrow to c. 10% spread.
– Equal dividends, the same treatment in case of sale similar liquidity.
– The only difference is voting rights.
– Historically spread used to widen in periods of high market stress and then reverted to the mean.
– Class A shares are also used as acquisition currency, making the spread subject to the temporary selling pressures of the former owners of acquirees.

Valuation: The spread is expected to narrow from $26/share to $10/share in reversion to the mean.

Exp. gain: 15%

Full $HEI write-up (free guest account required):

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