Ackman Victory with the Split Up of Alexander & Baldwin?
ALEX is a combination of three disparate businesses – ocean transportation and logistics services, real estate and agribusiness. The separation of the transportation and land businesses took place on June 29 after the company’s board approved the plan on June 8. The transportation spin-off will begin trading on the NYSE on July 2 as Matson Inc. (NYSE:MATX). Both of the companies will have more than $1 billion in assets, 1,000 employees and strong cash flow.
Ackman purchased 8.57% of ALEX in the first quarter of 2011, which he disclosed through a 13D (activist) filing. When he bought the shares, the company had just issued poor guidance for its shipping business, expecting a first-quarter loss due to high fuel prices. The other two businesses, real estate and agribusiness, both had positive outlooks.
In the first quarter of 2012, ALEX’s Ocean Transportation revenue increased 17 percent from the year-ago quarter due primarily to higher rates reflecting higher fuel prices, as well as volume growth. Operating profit increased 50%. The Logistics Services division’s revenue slipped 5 percent, primarily due to decreased volume. Operating profit decreased $1.2 million to $0.3 million.
Though Ackman is not named publicly as a catalyst for the spin-off, he performed a similar operation on Fortune Brands (NYSE:FBHS), a conglomerate composed of diverse liquor, home furnishing, hardware, golf products and home security businesses. After purchasing a sizable activist position in the company, Ackman was instrumental in spinning off two businesses into publicly traded companies, Fortune Brands Home & Security (NYSE:FBHS) and BEAM (NYSE:BEAM), in October 2011.
After the spin-off, Ackman has 3,644,870 shares of the new company, Matson Inc., and 3,644,870 shares of Alexander & Baldwin.
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