Parsad Posted October 22, 2018 Share Posted October 22, 2018 Anyone have any knowledge about what KKR has of operational experience in this space? How do you assess the MM management on a stand-alone basis [as alternative to be a part of FCAU]? How much in earnings after tax per year is disappearing from FCAU going forward by this deal? They own Calsonic, so they've got some experience...how you rate it, I have not idea. Can't say anything in particular about MM management...other than they've been doing an ok job at MM. Don't know enough about them. About $300M Euros from 2018 earnings of $5B Euros. So not much...you sell something worth 30% of your equity and lose only 6% of your net earnings. Cheers! Link to comment Share on other sites More sharing options...
John Hjorth Posted October 22, 2018 Share Posted October 22, 2018 Thank you, Sanjeev, -And yes, I was lazy ... asking, without doing my own work. -I haven't bought any EXOR shares yet! Link to comment Share on other sites More sharing options...
Spekulatius Posted October 22, 2018 Share Posted October 22, 2018 The KKR deal pales in comparison to what Marchionne had in mind--either there were material underlying problems with MM that were not disclosed or KKR is getting a good deal. And of course, the latter is more likely than the former... I'm not sure "pales in comparison" is correct. The $6.2B deal is only $0.6B away from the $6.8B Marchionne wanted from KKR before he passed away. At that time, KKR had offered $5.8B. FCAU needed two things to happen in any deal...a reasonable price and ensure that their component supply wasn't disrupted. They got both. Could they have held out for more...possibly. But they got mostly what they were asking for and they can move forward. Cheers! Valuations are way down from a few month ago in the car supplier sector. There are a boatload of companies trading at around 5x EBITDA now. DLPH alone lost ~ 50% of their market cap in the last few month. Link to comment Share on other sites More sharing options...
Spekulatius Posted October 22, 2018 Share Posted October 22, 2018 Stock should be up substantially tomorrow...but who knows these days :-X LOL. This market really hates automakers. It can always come worse. now with MM, 500M in EBITDA will be missing, which can cause an earnings revision and presto, we have an earnings miss. No joke, but this occurred with BASF when they announced a merger of their E&P and refinery sub (Wintershall). Link to comment Share on other sites More sharing options...
Pondside47 Posted October 22, 2018 Share Posted October 22, 2018 Stock should be up substantially tomorrow...but who knows these days :-X LOL. This market really hates automakers. It can always come worse. now with MM, 500M in EBITDA will be missing, which can cause an earnings revision and presto, we have an earnings miss. No joke, but this occurred with BASF when they announced a merger of their E&P and refinery sub (Wintershall). I still remember half a year ago the market was willing to bid up FCAU purely based on rumor and now there is a concrete sale and there's no movement in the stock. I was just reading Howard Mark's new book last night and this change in market psychology is exactly what he described in the book. Earning miss/volatility aside, the stock may be a little to no risk bet at this price in the long run IF you really think the sale proceed is bird in hand. To me, bird in hand means returning the sale proceeds as special dividend rather than buying back shares. I can't be 100% sure about what value is going to what player in the auto industry in the next 10 years. I'd rather have the money now and use future earning to reinvest as future earning comes in year after year. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted October 23, 2018 Share Posted October 23, 2018 Stock should be up substantially tomorrow...but who knows these days :-X LOL. This market really hates automakers. It can always come worse. now with MM, 500M in EBITDA will be missing, which can cause an earnings revision and presto, we have an earnings miss. No joke, but this occurred with BASF when they announced a merger of their E&P and refinery sub (Wintershall). I still remember half a year ago the market was willing to bid up FCAU purely based on rumor and now there is a concrete sale and there's no movement in the stock. I was just reading Howard Mark's new book last night and this change in market psychology is exactly what he described in the book. Earning miss/volatility aside, the stock may be a little to no risk bet at this price in the long run IF you really think the sale proceed is bird in hand. To me, bird in hand means returning the sale proceeds as special dividend rather than buying back shares. I can't be 100% sure about what value is going to what player in the auto industry in the next 10 years. I'd rather have the money now and use future earning to reinvest as future earning comes in year after year. TBH, I tend to agree. I get that dividends are less tax efficient than repurchases, but.... 1) I own this in a retirement account and would welcome the liquidity 2) I have substantial holdings in Exor as well, and hoping that some form of liquidity event would allow them to repurchase their own shares at a substantial discount to NAV. Link to comment Share on other sites More sharing options...
plato1976 Posted October 23, 2018 Share Posted October 23, 2018 what's a reasonable acquisition price in you guys' opinion? The KKR deal pales in comparison to what Marchionne had in mind--either there were material underlying problems with MM that were not disclosed or KKR is getting a good deal. And of course, the latter is more likely than the former... I'm not sure "pales in comparison" is correct. The $6.2B deal is only $0.6B away from the $6.8B Marchionne wanted from KKR before he passed away. At that time, KKR had offered $5.8B. FCAU needed two things to happen in any deal...a reasonable price and ensure that their component supply wasn't disrupted. They got both. Could they have held out for more...possibly. But they got mostly what they were asking for and they can move forward. Cheers! Link to comment Share on other sites More sharing options...
Parsad Posted October 23, 2018 Share Posted October 23, 2018 what's a reasonable acquisition price in you guys' opinion? The KKR deal pales in comparison to what Marchionne had in mind--either there were material underlying problems with MM that were not disclosed or KKR is getting a good deal. And of course, the latter is more likely than the former... I'm not sure "pales in comparison" is correct. The $6.2B deal is only $0.6B away from the $6.8B Marchionne wanted from KKR before he passed away. At that time, KKR had offered $5.8B. FCAU needed two things to happen in any deal...a reasonable price and ensure that their component supply wasn't disrupted. They got both. Could they have held out for more...possibly. But they got mostly what they were asking for and they can move forward. Cheers! They paid just over 20 times net earnings or 1.25 times revenues...that seems pretty fair. Cheers! Link to comment Share on other sites More sharing options...
walkie518 Posted October 23, 2018 Share Posted October 23, 2018 what's a reasonable acquisition price in you guys' opinion? The KKR deal pales in comparison to what Marchionne had in mind--either there were material underlying problems with MM that were not disclosed or KKR is getting a good deal. And of course, the latter is more likely than the former... I'm not sure "pales in comparison" is correct. The $6.2B deal is only $0.6B away from the $6.8B Marchionne wanted from KKR before he passed away. At that time, KKR had offered $5.8B. FCAU needed two things to happen in any deal...a reasonable price and ensure that their component supply wasn't disrupted. They got both. Could they have held out for more...possibly. But they got mostly what they were asking for and they can move forward. Cheers! They paid just over 20 times net earnings or 1.25 times revenues...that seems pretty fair. Cheers! I will have to disagree on this point. MM is probably a better business than the parent dollar for dollar with arguably greater growth prospects. Without going down that path, before his death, Marchionne was discussing spinning MM: a tax-free event is far better than a taxable one. The sale to KKR for cash should be understood to be discounted by shareholders since the net return will be lower. Link to comment Share on other sites More sharing options...
Shooter MacGavin Posted October 23, 2018 Share Posted October 23, 2018 what's a reasonable acquisition price in you guys' opinion? The KKR deal pales in comparison to what Marchionne had in mind--either there were material underlying problems with MM that were not disclosed or KKR is getting a good deal. And of course, the latter is more likely than the former... I'm not sure "pales in comparison" is correct. The $6.2B deal is only $0.6B away from the $6.8B Marchionne wanted from KKR before he passed away. At that time, KKR had offered $5.8B. FCAU needed two things to happen in any deal...a reasonable price and ensure that their component supply wasn't disrupted. They got both. Could they have held out for more...possibly. But they got mostly what they were asking for and they can move forward. Cheers! They paid just over 20 times net earnings or 1.25 times revenues...that seems pretty fair. Cheers! I will have to disagree on this point. MM is probably a better business than the parent dollar for dollar with arguably greater growth prospects. Without going down that path, before his death, Marchionne was discussing spinning MM: a tax-free event is far better than a taxable one. The sale to KKR for cash should be understood to be discounted by shareholders since the net return will be lower. I don't think that's totally true. i think a sale is a better outcome. Here's what Sergio had said during the capital markets day below. The point is that they will be in a better liquidity position following the sale, and in my view, it speeds up the timeline for a Maserati spin. FCA management wanted a Maserati spin but they knew that investing in Maserati's (electrification in particular) needed to be subsidized by NA. With $5-6B USD in cash after tax on the books in addition to CFOA, I think they're in a better position to pull that forward, in addition to capitalizing a FinCo. Personally I would much rather see a liquid FCA and an earlier Maserati spin than a Magneti spin by year-end. "What Richard has confirmed today is the fact that we're going to -- we are on the way to spin Marelli to shareholders and that we hope to accomplish that by the end of the year. The only thing I do not know is that if somebody shows up with a check in the interim, between now and the time that the spin happens, whether we're going to be receptive to such an offer. And I think we would be if it was -- it's a properly recognized value. And I think that's got a whole pot of implications because obviously it puts FCA in a net cash position almost instantly, certainly by the end of '18. So all the things that Richard talked about in terms of potential share buybacks, capital availability, the ability to move on Finco, are things which become a lot more immediate in nature than would be in the absence of a transaction. For our purposes, we'll assume the simple spin. The business will spin by the end of '18. And shareholders will end up getting a share of Marelli. But anything between now and then which comes in and effectively removes that right is okay with us. I mean, let it come. It can happen (inaudible). And on the SUV side of pricing." Link to comment Share on other sites More sharing options...
walkie518 Posted October 23, 2018 Share Posted October 23, 2018 what's a reasonable acquisition price in you guys' opinion? The KKR deal pales in comparison to what Marchionne had in mind--either there were material underlying problems with MM that were not disclosed or KKR is getting a good deal. And of course, the latter is more likely than the former... I'm not sure "pales in comparison" is correct. The $6.2B deal is only $0.6B away from the $6.8B Marchionne wanted from KKR before he passed away. At that time, KKR had offered $5.8B. FCAU needed two things to happen in any deal...a reasonable price and ensure that their component supply wasn't disrupted. They got both. Could they have held out for more...possibly. But they got mostly what they were asking for and they can move forward. Cheers! They paid just over 20 times net earnings or 1.25 times revenues...that seems pretty fair. Cheers! I will have to disagree on this point. MM is probably a better business than the parent dollar for dollar with arguably greater growth prospects. Without going down that path, before his death, Marchionne was discussing spinning MM: a tax-free event is far better than a taxable one. The sale to KKR for cash should be understood to be discounted by shareholders since the net return will be lower. I don't think that's totally true. i think a sale is a better outcome. Here's what Sergio had said during the capital markets day below. The point is that they will be in a better liquidity position following the sale, and in my view, it speeds up the timeline for a Maserati spin. FCA management wanted a Maserati spin but they knew that investing in Maserati's (electrification in particular) needed to be subsidized by NA. With $5-6B USD in cash after tax on the books in addition to CFO, I think they're in a better position to push that forward. Personally I would much rather see a liquid FCA and an earlier Maserati spin than a Magneti spin by year-end. "What Richard has confirmed today is the fact that we're going to -- we are on the way to spin Marelli to shareholders and that we hope to accomplish that by the end of the year. The only thing I do not know is that if somebody shows up with a check in the interim, between now and the time that the spin happens, whether we're going to be receptive to such an offer. And I think we would be if it was -- it's a properly recognized value. And I think that's got a whole pot of implications because obviously it puts FCA in a net cash position almost instantly, certainly by the end of '18. So all the things that Richard talked about in terms of potential share buybacks, capital availability, the ability to move on Finco, are things which become a lot more immediate in nature than would be in the absence of a transaction. For our purposes, we'll assume the simple spin. The business will spin by the end of '18. And shareholders will end up getting a share of Marelli. But anything between now and then which comes in and effectively removes that right is okay with us. I mean, let it come. It can happen (inaudible). And on the SUV side of pricing." the EBITDA multiple of the purchase is low relative to the pe market as a whole, unless we think the parts business will shrink w/auto sales and we've peaked for parts are you suggesting that the purpose of all the talk and whatever costs associated with the legwork to spin was to get a buyer to step in before the stock is let loose on public markets? or are you suggesting that KKR is paying a dear price for an asset that public markets would not learn to appreciate? I think it's likely that KKR is underpaying and the firm should be able to unlock additional upside as a strategic buyer... for control from a strategic, shouldn't there be a premium? Link to comment Share on other sites More sharing options...
Shooter MacGavin Posted October 23, 2018 Share Posted October 23, 2018 well I'm not making a judgment as to the value of the business since I don't know enough about the parts business. They have agreed to pay ~12x EBIT, which on the surface seems about right. For a steady state business that's probably ok. But again, I don't know the upside here. Maybe there's more value to be extracted by a turn or so but I doubt there's much more. Clearly there's not a lot of bidders out there. I'm just making the point that a sale is a better outcome than a spin, assuming they didn't totally get low-balled on valuation, because it allows them to enhance the value of core FCA much faster than would be the case with a spin, simply because FCA is less capital constrained as a result of the sale. The net benefit from greater liquidity to core FCA is high so that should be considered. That's my view. Btw, it's not KKR, but it's Calsonic, which is owned by KKR. So it's, in effect, a strategic buyer, which has access to cheap capital. I don't know who the next bidder is. But that's about as rich a buyer as you get. Link to comment Share on other sites More sharing options...
Parsad Posted October 23, 2018 Share Posted October 23, 2018 what's a reasonable acquisition price in you guys' opinion? The KKR deal pales in comparison to what Marchionne had in mind--either there were material underlying problems with MM that were not disclosed or KKR is getting a good deal. And of course, the latter is more likely than the former... I'm not sure "pales in comparison" is correct. The $6.2B deal is only $0.6B away from the $6.8B Marchionne wanted from KKR before he passed away. At that time, KKR had offered $5.8B. FCAU needed two things to happen in any deal...a reasonable price and ensure that their component supply wasn't disrupted. They got both. Could they have held out for more...possibly. But they got mostly what they were asking for and they can move forward. Cheers! They paid just over 20 times net earnings or 1.25 times revenues...that seems pretty fair. Cheers! I will have to disagree on this point. MM is probably a better business than the parent dollar for dollar with arguably greater growth prospects. Without going down that path, before his death, Marchionne was discussing spinning MM: a tax-free event is far better than a taxable one. The sale to KKR for cash should be understood to be discounted by shareholders since the net return will be lower. So the guy who worked with Marchionne for 11 years, and has been chosen to lead the company, knows less about what Marchionne wanted or expected than people sitting writing on a message board? The sale price was quite good, especially in comparison to sales/bids/deals being made for other parts manufacturers. Could it have been higher...sure. But it could have been a hell of a lot lower as well based on market sentiment at the moment. Also a tax-free event would only be better if the valuation is greater than the net value of a taxable event. Considering how car parts manufacturers are currently being valued, as well as how Aston Martin's IPO went, a spin-off may have been valued at less than $5B Euros. Whichever way you want to look at it...a significant amount of value has been made liquid, while the remaining company gets even cheaper on a P/E basis. Cheers! Link to comment Share on other sites More sharing options...
cubsfan Posted October 23, 2018 Share Posted October 23, 2018 So the guy who worked with Marchionne for 11 years, and has been chosen to lead the company, knows less about what Marchionne wanted or expected than people sitting writing on a message board? That's the point. This culture has been changed for good and for the better. Marchionne was so close to this management team, they're not likely to let him down. Plus you have an owner that is largely aligned with his shareholders. How much more can you ask for? Link to comment Share on other sites More sharing options...
Parsad Posted October 23, 2018 Share Posted October 23, 2018 So the guy who worked with Marchionne for 11 years, and has been chosen to lead the company, knows less about what Marchionne wanted or expected than people sitting writing on a message board? That's the point. This culture has been changed for good and for the better. Marchionne was so close to this management team, they're not likely to let him down. Plus you have an owner that is largely aligned with his shareholders. How much more can you ask for? Yup! And Manley's leadership of Jeep has been stellar. Look at what he's done with Jeep in the last decade. I think both Jeep and Ram could sell for nearly the entire market value of FCAU. Powerful brands with huge consumer loyalty. Cheers! Link to comment Share on other sites More sharing options...
kab60 Posted October 23, 2018 Share Posted October 23, 2018 I'm not invested in FCAU but it seems like a very rich price (compared to public parts manufacturers) and shows how much liquidity PE has at the moment. There are a couple of ways to play that (Newell Brands, Alliance Data, Spectrum Brands etc) if one likes the underlying business. Link to comment Share on other sites More sharing options...
walkie518 Posted October 23, 2018 Share Posted October 23, 2018 So the guy who worked with Marchionne for 11 years, and has been chosen to lead the company, knows less about what Marchionne wanted or expected than people sitting writing on a message board? That's the point. This culture has been changed for good and for the better. Marchionne was so close to this management team, they're not likely to let him down. Plus you have an owner that is largely aligned with his shareholders. How much more can you ask for? Yup! And Manley's leadership of Jeep has been stellar. Look at what he's done with Jeep in the last decade. I think both Jeep and Ram could sell for nearly the entire market value of FCAU. Powerful brands with huge consumer loyalty. Cheers! Plato tutored Aristotle who in turn tutored Alex the Great...from master to student, material philosophical divergences emerge! Agreed that Manley did a great job at Jeep but his deal prowess may not be at Marchionne's level? It could be that this was Marchionne's plan all along, but initial assessments indicated that MM might have been worth more. Then again, Marchionne was a master in sales... Link to comment Share on other sites More sharing options...
Parsad Posted October 23, 2018 Share Posted October 23, 2018 So the guy who worked with Marchionne for 11 years, and has been chosen to lead the company, knows less about what Marchionne wanted or expected than people sitting writing on a message board? That's the point. This culture has been changed for good and for the better. Marchionne was so close to this management team, they're not likely to let him down. Plus you have an owner that is largely aligned with his shareholders. How much more can you ask for? Yup! And Manley's leadership of Jeep has been stellar. Look at what he's done with Jeep in the last decade. I think both Jeep and Ram could sell for nearly the entire market value of FCAU. Powerful brands with huge consumer loyalty. Cheers! Plato tutored Aristotle who in turn tutored Alex the Great...from master to student, material philosophical divergences emerge! Agreed that Manley did a great job at Jeep but his deal prowess may not be at Marchionne's level? It could be that this was Marchionne's plan all along, but initial assessments indicated that MM might have been worth more. Then again, Marchionne was a master in sales... I think we'll have a better idea on October 30th. Reuters originally announced the deal as $6.2B Euros excluding debt. Perhaps there's another $500M to $1B in MM debt that Calsonic took on. In that case, the deal would look pretty damn good. We'll find out next Tuesday. Cheers! Link to comment Share on other sites More sharing options...
Spekulatius Posted October 23, 2018 Share Posted October 23, 2018 So the guy who worked with Marchionne for 11 years, and has been chosen to lead the company, knows less about what Marchionne wanted or expected than people sitting writing on a message board? For all practical purposes, Jeep and Ram are Fiat right now. The Fiat legacy brand only generates a fairly small amount of the profits, maybe 20%. FCAU for all practical purposes is a NA light truck manufacturing company right now. That's the point. This culture has been changed for good and for the better. Marchionne was so close to this management team, they're not likely to let him down. Plus you have an owner that is largely aligned with his shareholders. How much more can you ask for? Yup! And Manley's leadership of Jeep has been stellar. Look at what he's done with Jeep in the last decade. I think both Jeep and Ram could sell for nearly the entire market value of FCAU. Powerful brands with huge consumer loyalty. Cheers! Link to comment Share on other sites More sharing options...
Shooter MacGavin Posted October 24, 2018 Share Posted October 24, 2018 well it turns out the UK has turned into Saudi Arabia.. https://www.bbc.com/news/business-45957673 Link to comment Share on other sites More sharing options...
DTEJD1997 Posted October 30, 2018 Share Posted October 30, 2018 Hey all: FCAU is going to be releasing earnings in under 8 hours. Analysts expect in the low 90's per share. I've been hearing reports that the new Dodge RAM trucks are well reviewed, well received, and selling somewhat better than planned. Some of these trucks can EASILY cost $50k or more. That should be some THICK margin for FCAU. I am going to guess that they slightly beat estimates...maybe $1/share in earnings? We will know within the day! Link to comment Share on other sites More sharing options...
Parsad Posted October 30, 2018 Share Posted October 30, 2018 Hey all: FCAU is going to be releasing earnings in under 8 hours. Analysts expect in the low 90's per share. I've been hearing reports that the new Dodge RAM trucks are well reviewed, well received, and selling somewhat better than planned. Some of these trucks can EASILY cost $50k or more. That should be some THICK margin for FCAU. I am going to guess that they slightly beat estimates...maybe $1/share in earnings? We will know within the day! I'm more interested in what they will announce they are doing with the $7B! Cheers! Link to comment Share on other sites More sharing options...
DTEJD1997 Posted October 30, 2018 Share Posted October 30, 2018 Hey all: Oh man...turns out I was way off in my prognostication for FCAU! They only had earnings of $.89/share, which I think is a slight miss. Obviously FCAU is a broken/damaged company...everybody needs to get out now! Hopefully traders will notice this TERRIBLE turn of events and SELL OFF FCAU. Hopefully, it can be one of the biggest losers for the day. I would like to see it down at least 5 points. In other news, it appears that upon closure of the Magenetti/Marelli sale, there is going to be a 2BB dividend of a special nature. There also appears to be a regular quarterly dividend starting in 1st quarter of 2019? Surprised no "news" outlet has picked up on this yet...must be asleep at the switch. Link to comment Share on other sites More sharing options...
orion Posted October 30, 2018 Share Posted October 30, 2018 The 0.89 per share number is EUR not $. Link to comment Share on other sites More sharing options...
DTEJD1997 Posted October 30, 2018 Share Posted October 30, 2018 The 0.89 per share number is EUR not $. Ugh!!! too early in the AM for me! Thank you for pointing this out. It appears then that FCAU made $1.01/share in USD? Well, I might get wish anyway...FCAU appears to be down $.05/share in pre-market trading. Going to be an interesting day. Link to comment Share on other sites More sharing options...
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