What is your dream job? A lot of great options to choose from, but personally I have always imagined being a member of a company’s board of directors to be a pretty cushy gig. Jet around, fancy dinners, high salaries and all for a few meetings per year that you can apparently skip if you are Leon Black. Toss in Hawaii on top of that? Getting reaaaaally tough to think of something better. Unfortunately, it wasn’t my lucky day, but with the upcoming split of Alexander & Baldwin’s (ALEX) land and real estate operations from its transportation business there will be a few more people in this world with my dream job.
The new Alexander & Baldwin will be a “Hawaii-focused land company with interests in real estate development, real estate leasing and agriculture.” Interestingly, with 88K acres of land the company is the fourth largest private landowner in the state. Here is a 2011 snapshot of the business taken from the Form 10:
|
Segment
|
|
2011 Revenue
(in millions) |
|
Percentage
of Total
2011
Revenue |
|
2011
Operating
Profit
(in millions) |
|
Percentage of
Total 2011
Operating
Profit |
|
Key Facts |
| Real Estate Sales |
|
$ |
59.8 |
|
|
19 |
% |
$ |
15.5 |
|
|
20 |
% |
Hawaii-focused, experienced developer with a large development pipeline encompassing over a dozen projects entitled for approximately 1,700 resort residential, 600 primary residential and 200 commercial units. Fourth largest private landowner in Hawaii with nearly 88,000 acres. |
| Real Estate Leasing |
|
$ |
99.7 |
|
|
31 |
% |
$ |
39.3 |
|
|
51 |
% |
High-quality commercial portfolio consisting of 45 improved properties in Hawaii and 8 Mainland states totaling 7.9 million square feet.
|
| Agribusiness |
|
$ |
157.5 |
|
|
50 |
% |
$ |
22.2 |
|
|
29 |
% |
Largest farmer in Hawaii and only producer of raw sugar in Hawaii, producing nearly 183,000 tons of sugar in 2011, and provider of approximately 6 percent of renewable energy on both Maui
|
Matson will take over the current Alexander & Baldwin’s transportation and logistics businesses. The company is currently focused on Hawaii and Guam shipping routes (regulated by the Jones Act), but the company has a few new ships focused on growing its China to Long Beach business. In 2011, the company booked revenues of $1.46b (out of A&B’s total $1.7b) and operating profit of $79m (out of A&B’s total $163m).
The rationale behind the spin is hardly groundbreaking as apparently just having operations in Hawaii is no longer reason enough to remain tied together. The transaction will create two companies in separate industries with different operating characteristics. Management will then be able to focus on specific areas and be properly compensated while investors will be able to pick desired exposures and analysts will finally be able to understand these companies. Additionally, the separation could help Matson brush away any potential foreign ownership issues as it operates in a highly regulated industry.
The truth is the companies do seem to have distinct operating and risk profiles. Shipping is extremely capital intensive, sensitive to fuel prices and oh yeah, the economy isn’t so hot right now. On the other hand, while the margins aren’t bad in the real estate business there are macro issues and questions as to how much the company can really grow. Hawaii real estate is unique and limited in supply though and if things go bad, the company can always hope that Larry Ellison will be interested.
With board approval and post-transaction financing locked up, the spin is expected to take place on June 29th to shareholders as of June 18th. Shareholders will end up with one share of Matson and one share of the new Alexander & Baldwin for every share of ALEX currently owned. Matson is technically the parent in this case and will trade on the NYSE under the ticker MATX, while the new Alexander & Baldwin will retain the ticker ALEX. Very confusing. For additional information on Matson and the transaction, check out this company presentation and our earlier posts on the subject.
Disclosure: Author holds no position in any stock mentioned.
The post Aloha Matson! Alexander & Baldwin Spinoff Coming Soon appeared first on Stock Spinoffs.
