One of our equity holdings, Atlas Corporation, received a take-private bid at $14.45 / share today after the bell. It traded at $11.57 / share at the close. It can essentially be described as a publicly traded infrastructure fund, that is primarily focused on containership leasing and mobile power generation. Given it is led by the legendary David Sokol of Berkshire fame (and fall), it has potential to be something amazing in the future, and has already transformed dramatically under his oversight since 2017. The great thing about Atlas is it trades at ~7x ’23 earnings, so you’re not paying for that potential growth.
To cut to the chase, Sokol has bemoaned the share price multiple times on conference calls and Q&As. Here’s their March investor day long term guidance:
So the take-private group (which includes Sokol) wants to pay ~10x ’23 earnings. I think with a business model that has transformed the company to have contracted revenue with 8 years of term dialed in, a proven management team, and Sokol at the helm to bolster its energy arm – this thing will grow nicely over the next 10 years and get a re-rate as the track record is built.
I sent a quick note to David Sokol right after the deal was announced voicing my displeasure and offered to organize an SPV to roll equity. I’m not expecting anything back, but one has to do something (most people just throw their hands up and don’t take even the first step):
What likely will transpire *if* the deal goes through is there is a modest bump to the initial offer and it gets done. Ugh. The goal of making investments like this is the reinvestment risk is near eliminated as the business self funds its own growth and the capital invested can stay invested indefinitely. While this has been a multi-year investment to date, it would cut that hold period short and force a re-investment on our part. Not the end of the world but not part of the plan.
We will see what shakes out.
Disclosure: We own shares of Atlas Corp. This is not investment advice, do your own work.