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Company: Cost Group Inc. (CSGP)
Business: Cost He is an online real estate markets, information and analytical markets in real estate markets. He manages his business in two segments: North America, which includes the United States and Canada, and international, which mainly includes Europe, Asia-Pacific and Latin America. Its main brands include costing, a global provider of real estate, analytical and news data; Loopnet, a commercial real estate market; Apartments.com, a apartment rental platform; and men.com, a residential real estate market.
Value market value: $ 32.64 million ($ 77.39 per action)
Group cost from the last twelve months
Activists: Shaw and Third Point
Shaw owned by Shaw: n/a
Third point property: 2.04%
Middle Cost: n/a
Activist comment: Of Shaw is a large multi -stued background that is not historically known for activism. The firm is not an activist investor. Rather, it uses activism as an opportunistic tool in situations where the firm considers it useful. Shaw is looking for solid businesses in good industries and if it identifies a lower performance within management control, it will play an active role. It lays a premium on a private constructive commitment to management, and therefore often reaches an agreement with the company before its position is even public.
The third point is a multi -stree -in -the -way fund, founded by Dan Loeb, which will selectively occupy activist positions. Loeb is one of the true pioneers in the field of shareholders’ activism and one of the handful of activists who shaped what has become the activism of current shareholders. Invented the poison from the poison at a time when it was often necessary. As the times have changed, it has gone from the poison pen to the power of the argument. The third point has obtained a representation of the Board in companies like Baxter and Disney, but he will not hesitate to launch a struggle for proxy if he is ignored.
What happens
Over April 6Costa Group signed support agreements with Shaw and the third point in relation to a soda and corporate government. It includes the addition of Christine McCarthy, John Berisford and Rachel Glaser as board directors; The withdrawal of Michael Klein, Christopher Nassetta and Laura Kaplan from the Council. It also includes the appointment of Louise Sams as President of the Independent Council and the creation of a capital allocation committee. Shaw and the third point agreed to comply with certain regular and voting provisions.
Behind the scenes
Cosar Group is an online real estate markets, information and analytical markets in real estate markets. It manages the main brands such as costing Suite, Loopnet, Apartments.com and Men.com. About 95% of the company’s income is derived from the main business, which is largely on the cost of suite and apartments.com, which benefit from high barriers to entrance, a strong prices power, property data and business models based on subscriptions that drive recurring revenue and highly predictable free cash flow. Due to these dynamics, this business has historically contributed with a premium for its information classmates, but now you are trading in line with them.
This regression in the valuation of the company is largely derived from the aggressive investment of cost in its business in the residential market, Men.com, which he acquired May 2021. Unlike its basic companies costing suite and apartment.com, Men.com has no clear competitive advantages and faces intense competition from well -established Companys such as Zillow. However, the company deviates approximately 75% of its $ 1.3 billion of earnings before interest, taxes, depreciation and repayment of its main business to finance $ 900 million in men’s losses.com. As a result, capital expenses increased by 878% from 2021 to 2024, marked by an increase of 347% by only 2024.
Enter Shaw and the third point that have signed support agreements separately with cost in relation to A refreshment of the board and improvements of corporate government. This includes the following: (i) The addition of Christine McCarthy (Ex -CFO de Disney), John Berisford (former President of S&P Global) and Rachel Glaser (ex -Etys) as directors; (II) The retirement of President Michael Klein, Christopher Nassetta and Laura Kaplan of the Council; (iii) the appointment of Louise Sams as independent president; and (IV) the creation of a capital allocation committee, to which Berisford and McCarthy will be joined. In activism, there are settlements that are intended to quench an activist investor to keep them silent and there are genuine settlements that mean a real agreement with the activist on how to proceed. This is the latter. First, the obvious indication is that three counselors were replaced on an eight -person board, which is a great refreshment (about 40% of the council). But less evident and more important is the structure of the settlement and who was replaced. First, the agreement was structured as a replacement for the directors, not an addition of three directors, which is more common in settlements, particularly those with relatively smaller boards (that is, eight $ 30 billion councilors). Secondly, the three replaced directors were three of the four longest directors, excluding the CEO, and one of them has been the chairman of the company since 1987. In addition, the new President of the Council is the second most recent director before the liquidation. It is not only a plate soda, but also in substance.
There is also a more subtle provision of the liquidation that we think has more information on which levers for value creation can follow: the formation of a capital allocation committee, which will consist of four counselors, two of which will be the new Shaw/Third Point directors. This is a clear situation of something that is often seen in activist campaigns: a basic business that is very profitable, but that the benefits are used to fund an unprofitable business. But the plan here is not likely to completely disassociate the business of men.com, or we would have seen a strategic transactions committee. This capital allocation committee will be commissioned to find ways to finance the business of men.com without using the cash flow from the main business. This could include a Spinoff of the Business with a cost that retains some property, a sale of a part of the business to a strategic investor or with a third party capital. The Capital Assignment Committee is also commissioned to evaluate international expansion. Costing has already made movements to expand in internationally, including the acquisition of Ontthemarket.com A end of 2023one of the three most visited residential properties portals in the United Kingdom. The company too recently offered To acquire the signing of the Australian real estate property Domain Holdings. The Capital Assignment Committee will undoubtedly evaluate this potential transaction and others and will make recommendations to the recent reconstituted. Ultimately, the goal here is to emerge with the main business of cost, with the prospects for international growth valued in a multiple of its $ 1.3 billion consisting of the 30+ Ebitda Multiples it received historically. This would lead to about $ 45 billion business value compared to current $ 30 billion.
Both the third point and the Shaw are not purely activists, but the companies of various strategies that often use activism as an opportunistic tool. The third point, founded by Dan Loeb, is a real pioneer in shareholders’ activism, but has used it more moderately in recent years, dictated by the market environment and the opportunities available. Shaw is relatively new for activism, but the firm has shown in recent years that it is so expert in activism and in the other strategies that has been so successful in its multichannel fund. Although they both settled with the company in their own agreements, the two are certainly similar, but they do not act as a group. It is an encouraging development, and it is something we often see today, but rarely would see 15 years ago: it puts the value of shareholders above the ego. The third point revealed that it has a position of 2.04% in cost. Shaw did not spread his position, but as a coverage fund of $ 70 million, we do not take small activist positions: we hope that at least the third point size.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholders activism and the founder and founder of portfolio of the 13D activist fund, a mutual fund that invest in a portfolio of 13D Investments activists.
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