Spectrum Brands (SPB), mcap=$3.6bn, price $87.64 vs $85.80

Pitch: Branded consumer products company divesting one division for after-tax proceeds equivalent to current market cap and planning to spin-off/list another segment. The transactions will deleverage the company making it more focused on Home & Garden and Pet businesses and in turn, positioning it for re-rating. Mgmt has been communicating undervaluation, buying back stock, and recently approved a new buyback plan.

Valuation: Pro-forma for announced divestments, SPB trades near 7x EBITDA 2022 (and near 6x 2023) with peers at 8.5x to 14x. At 10x EBITDA in SOTP results in $129/share. Mgmt expects re-rating closer to 14-15x post-transactions, or $182/share target.

Exp. gain: +50% to $129 in SOTP framework or +100% to $182 based on management’s expectations.

Full SPB write-up (free guest account required):

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