Platform Specialty Products Corporation (NYSE:PAH)
In July, Platform announced the sale of its Ag Solutions business for $4.2 billion in cash to UPL Corp. Limited, an Indian agrochemical company, a price which represents full value for the business. The transaction will significantly reduce the company’s leverage levels from six times EBITDA to less than 2.5 times and will result in a more focused business with attractive growth and cash flow characteristics. Platform also announced a $750 million share repurchase authorization (~20% of company’s current market value) conditioned upon the closing of the transaction, which it expects to occur in late 2018 or early 2019.
In August, Platform reported another quarter of strong earnings growth. Organic revenue increased 7% and organic EBITDA grew 8%. Performance Solutions organic revenue grew 5% due to broad-based growth across its regions and end markets. Organic EBITDA grew 10% due to margin expansion resulting from strong sales growth of higher margin products and cost savings from supply chain initiatives. Ag Solutions organic revenue grew 10% due to strength in the Latin and North American markets. Organic EBITDA grew 6% as margins declined due to input cost inflation that was partially offset by price increases and cost savings. Overall, Platform’s EBITDA grew 10% due to a 2% boost from foreign exchange and EPS grew 30%.
While Platform’s share price has increased ~25% this year, it still trades at a discount to the peer set in light of its high leverage and transaction uncertainty until deal closure. If Platform were to trade at a multiple that is similar to its peers after the closing of the Ag Solutions sale, the company’s shares should appreciate significantly from current levels.
From Bill Ackman (Trades, Portfolio)'s second quarter 2018 Pershing Square shareholder letter.
