On December 19, 2024, FedEx Corporation (NYSE: FDX), a global transportation company headquartered in Memphis, TN, announced that following an internal strategic assessment of its North American less-than-truckload (LTL) or Freight division the company intended to pursue a separation of its core-Parcel and Freight (LTL) businesses into two standalone, publicly-traded companies via a tax-free spin-off.  Roughly in line with management’s initial expectations, in terms of timing, the transaction is expected to be completed on June 1, 2026, subject to customary conditions, including regulatory and final Board approvals.  Shares of the new company (i.e., SpinCo), which will be dubbed FedEx Freight Corporation, will trade on the New York Stock Exchange (NYSE) under the ticker “FDXF”. RemainCo, which will retain its current corporate moniker as well as ticker (“FDX”) intends to retain an up to 19.9% stake in the soon-to-be standalone Freight business (of which it “generally” expects to monetize within 12-months of the transaction’s completion).  For its part, the Freight business will hold an investor day, which will purportedly include more granular near- and medium-term financial guidance, on April 8^,2 026 (likely akin to the event the parent, internally referred to as FEC, conducted in February 2026).

In our view, the separation is an eminently logical move within the context of broader industry trends, which have demonstrated a material (and we think well-deserved considering the step-function improvement in margin profiles amid attractive underling industry dynamics) expansion in valuation multiples for standalone less-than-truckload carriers over the last decade as well as the impressive share price performance of XPO, Inc. (NYSE: XPO), which became a standalone LTL carrier following the spin-offs of GXO Logistics, Inc. (NYSE: GXO) in August 2021 and RXO, Inc. (NYSE: RXO) in November 2022 (although we would note that the share price performance was undoubtedly aided by the industry-wide impact from the bankruptcy of Yellow Corp. [formerly NASDAQ: YELL] in August 2023). 

Currently, FedEx reports two primary operating segments: 1) FedEx Express (89.5% of consolidated sales and ~82% of adj. EBITDA in May-ending F2025), previously reported under the FedEx Express, Ground & Services segments (but consolidated into one as part company’s DRIVE initiative), which is primarily a small package/parcel/airfreight provider; and 2) FedEx Freight (10.5% of sales and ~18% of adj. EBITDA in F2025), which provides over-the-road, less-than-truckload (LTL) transportation services. 

As clients likely well-know, we have been vocally bullish on this impending separation since its announcement (when shares were trading around ~$265 per share); in that context, given recent stock price performance it seems elementary to suggest that to some degree the seemingly obvious multiple arbitrage opportunity (i.e., parcel versus LTL multiples) has narrowed/been pulled forward over the last six-months.  That said, we still think the transaction will unlock incremental value.  To that end, RemainCo’s core-parcel business seemingly has positive momentum to continue outperforming peers  (and possess a nascent free cash flow story) and the Freight business, amid broader industry fundamentals that have been challenged (e.g., PMI’s under 50) since late-2022 as well as elevated non-adjusted separation/stand-up costs (e.g., expansion of a dedicated sales force) in the near-term, is seemingly near a bottom, and we see myriad avenues beyond a market improvement for the company to materially improve its earnings power/profitability, including a dedicated sales force, cost reductions, and a more LTL-specific operating paradigm over the next few years while still benefitting from a “continuing commercial collaboration” with its soon-to-be former parent. (To that end, we expect a key area of interest for investors will be Freight’s roadmap/strategic plan to narrow the gap versus peers, most notably best-in-class carrier Old Dominion who sports an operating margin ~1,000 basis points than the group average.)

On a pre-spin sum-of-the-parts basis, we value FedEx at $429.50 per share, comprised of $349.50 per share of value from RemainCo (i.e., parcel) and $64 per share from SpinCo (i.e., freight).  Given the implied upside to our fair value estimate we recommend the pre-spin purchase of FDX (where we see incremental upside from upward revisions at Freight, potentially catalyzed by the upcoming investor day,  as well at Parcel, given its FCF generation potential).  On a post spin basis, assuming a 3-for-1 distribution ratio and the Parent’s initial retention of a 19.9% stake in SpinCo, we value standalone FedEx (RemainCo) and FedEx Freight (SpinCo) at $356.50 and $64 per share, respectively. 

In January 2025, Aptiv PLC, a Dublin-based auto supplier, announced its intention to separate its Electrical Distribution Systems (EDS) business into an independent publicly traded company, to be called Versigent, through a tax-free transaction. Shareholders will receive one share of Versigent for every three Aptiv shares held on the record date of March 17, 2026. The spin-off received final board approval on March 5, 2026, with Versigent shares expected to be listed on the New York Stock Exchange (NYSE) under the symbol “VGNT,” with regular-way trading commencing on April 1, 2026. Versigent, headquartered in the United States, will be led by CEO Joseph Liotine, who served as Executive Vice President & President of the EDS business since FY 2024.  The separation is expected to simplify Aptiv’s (i.e., the parent’s) corporate structure and sharpen the company’s focus on high-growth, technology-driven automotive systems, while allowing the EDS (i.e., Versigent) business to pursue its own operating and capital allocation priorities as a standalone manufacturing enterprise. The transaction is expected to improve valuation transparency by addressing the conglomerate discount that has historically been assigned to the consolidated company.

The spin-off effectively separates two businesses with fundamentally different operating models, capital intensity, and margin structures. Versigent will emerge as a global leader in vehicle electrical architecture and power distribution systems with $8.8 billion in FY 2025 revenue, a global manufacturing footprint spanning 76 facilities across 50 countries, and relationships with the world’s largest OEMs. The business has meaningful scale and operational expertise in the design and production of low-voltage and high-voltage wiring architectures. Roughly 95% of its hourly workforce is located in best-cost countries, supporting a structurally competitive manufacturing cost base. While growth in the segment is closely tied to global vehicle production cycles, the business benefits from rising electrification trends that require increasingly complex high-voltage distribution systems and charging infrastructure components, which is an expanding segment that already represents 11% of Versigent’s mix. As an independent entity, Versigent will have greater strategic flexibility to optimize its manufacturing footprint, pursue targeted acquisitions, and expand into adjacent industrial end markets such as commercial vehicles and construction equipment, which currently represent ~10% of the segment revenue. Nevertheless, the business remains inherently more labor-intensive and operates with structurally lower margins relative to Aptiv’s software-oriented and computing-driven businesses.

By contrast, post-spin Aptiv will operate as a technology-focused advanced mobility supplier centered on software-defined vehicle architecture, advanced driver-assistance systems (ADAS), centralized computing platforms, and high-value electronic components. These product categories are structurally aligned with several long-term industry megatrends, including the transition toward software-defined vehicles, increasing ADAS penetration, and the growing importance of centralized electrical & electronic architectures within next-generation vehicles. Global light vehicle production is projected to grow modestly at ~1% annually, but content per vehicle for advanced electronics & safety systems continues to increase significantly as automakers integrate connectivity, automation, and electrification technologies. RemainCo’s Intelligent Systems and Engineered Components segments are well-positioned to capitalize on this trend, driving revenue growth that materially outpaces overall industry vehicle production. The automotive total addressable market (TAM) for Intelligent Systems alone is expected to grow from ~$70 billion in FY 2025 to $95 billion by FY 2030E. Further, RemainCo is expected to enter non-automotive markets such as aerospace & defense, telecom infrastructure, and industrial automation. These markets are each expected to grow faster than automotive and help reduce cyclicality in the company’s revenue profile with the total market value projected to reach $155 billion by FY 2030E. With the EDS segment removed, RemainCo’s financial profile becomes more aligned with higher-growth technology platforms rather than a traditional automotive component manufacturing business. RemainCo is expected to generate $12.8-$13.2 billion in revenue in FY 2026E with an adjusted EBITDA margin of ~18.6%.

Over the medium term, management expects compound annual revenue growth (CAGR) of 4%-7% between FY 2025-2028E for RemainCo, with ~200 bps of EBITDA margin expansion. Margin expansion is expected to be driven by a product mix moving toward high-margin software & services, scale benefits in advanced electronics, and structural cost improvements through footprint/network optimization and digital manufacturing initiatives. For Versigent, revenue is expected to grow at a 3%-4% CAGR between FY 2025-2028E, with EBITDA margins expanding by ~200 bps over the same period driven by manufacturing efficiency initiatives, supply chain optimization, automation, and improved product mix associated with high voltage electrical architectures required for electric vehicles.

In our view, the separation also serves to improve capital allocation transparency. To that end, Aptiv intends to use ~$1.6 billion in proceeds from the Versigent spin dividend to reduce debt, targeting a gross leverage ratio in the range of 2.0x-2.5x following the transaction. With a strengthened balance sheet and improved free cash flow generation, RemainCo will be positioned to fund organic technology investments, pursue selective bolt-on acquisitions, and return capital to shareholders through a balanced combination of dividends & share repurchases. In contrast, Versigent’s capital allocation priorities as an independent company are expected to focus on operational efficiency, footprint optimization, and cash flow generation.

Further, again, in our view, the transaction addresses the structural conglomerate discount that has historically affected Aptiv’s valuation multiple. Prior to the spin-off, the market, in our estimation, effectively valued the company as a hybrid automotive supplier, blending the high-growth software and computing businesses with the low-margin wiring harness manufacturing segment. By separating the two operations, investors will be able to evaluate each business on its own merits and better focus their own capital allocation. All told, RemainCo becomes a more pure-play advanced automotive technology platform with higher margins, stronger intellectual property positioning, and greater exposure to long-term software-driven automotive trends while Versigent emerges as a scaled global supplier of electrical architecture solutions with stable OEM relationships and a clear pathway to operational margin improvement.

While both companies remain exposed to external headwinds including automotive production cyclicality, global trade frictions, and near-term transformation costs associated with the separation, their more focused post-spin strategies position them to pursue distinct growth and capital allocation paths. Over the medium-to-long term, we discern the improved strategic clarity, enhanced financial transparency, and differentiated investment profiles should support stronger valuation frameworks for both entities, with the historical conglomerate discount applied to Aptiv’s consolidated structure now in the process of being diminished and/or eliminated.

For our part, we value Aptiv on a sum-of-the-parts (SOTP) basis, applying median EV/EBITDA multiples to management’s average FY 2026E guidance. To that end, post-spin Versigent is valued at ~$2.4 billion using a 4x multiple while RemainCo is valued at ~$18.3 billion, using peer-aligned multiples of 10x. Adjusting for net debt, pension liabilities, minority interest and investments results in a combined equity value of ~$20.7 billion, or $97.50 per share, implying ~39% upside from current levels.  In effect, Aptiv’s current valuation suggests that investors can acquire the RemainCo advanced mobility technology platform and receive the Versigent spin-off at little to no incremental cost.

In January 2025, Aptiv PLC, a Dublin-based auto supplier, announced its intention to separate its Electrical Distribution Systems (EDS) business into an independent publicly traded company, to be called Versigent, through a tax-free transaction. Shareholders will receive one share of Versigent for every three Aptiv shares held on the record date of March 17, 2026. The spin-off received final board approval on March 5, 2026, with Versigent shares expected to be listed on the New York Stock Exchange (NYSE) under the symbol “VGNT,” with regular-way trading commencing on April 1, 2026. Versigent, headquartered in the United States, will be led by CEO Joseph Liotine, who served as Executive Vice President & President of the EDS business since FY 2024.  The separation is expected to simplify Aptiv’s (i.e., the parent’s) corporate structure and sharpen the company’s focus on high-growth, technology-driven automotive systems, while allowing the EDS (i.e., Versigent) business to pursue its own operating and capital allocation priorities as a standalone manufacturing enterprise. The transaction is expected to improve valuation transparency by addressing the conglomerate discount that has historically been assigned to the consolidated company.

The spin-off effectively separates two businesses with fundamentally different operating models, capital intensity, and margin structures. Versigent will emerge as a global leader in vehicle electrical architecture and power distribution systems with $8.8 billion in FY 2025 revenue, a global manufacturing footprint spanning 76 facilities across 50 countries, and relationships with the world’s largest OEMs. The business has meaningful scale and operational expertise in the design and production of low-voltage and high-voltage wiring architectures. Roughly 95% of its hourly workforce is located in best-cost countries, supporting a structurally competitive manufacturing cost base. While growth in the segment is closely tied to global vehicle production cycles, the business benefits from rising electrification trends that require increasingly complex high-voltage distribution systems and charging infrastructure components, which is an expanding segment that already represents 11% of Versigent’s mix. As an independent entity, Versigent will have greater strategic flexibility to optimize its manufacturing footprint, pursue targeted acquisitions, and expand into adjacent industrial end markets such as commercial vehicles and construction equipment, which currently represent ~10% of the segment revenue. Nevertheless, the business remains inherently more labor-intensive and operates with structurally lower margins relative to Aptiv’s software-oriented and computing-driven businesses.

By contrast, post-spin Aptiv will operate as a technology-focused advanced mobility supplier centered on software-defined vehicle architecture, advanced driver-assistance systems (ADAS), centralized computing platforms, and high-value electronic components. These product categories are structurally aligned with several long-term industry megatrends, including the transition toward software-defined vehicles, increasing ADAS penetration, and the growing importance of centralized electrical & electronic architectures within next-generation vehicles. Global light vehicle production is projected to grow modestly at ~1% annually, but content per vehicle for advanced electronics & safety systems continues to increase significantly as automakers integrate connectivity, automation, and electrification technologies. RemainCo’s Intelligent Systems and Engineered Components segments are well-positioned to capitalize on this trend, driving revenue growth that materially outpaces overall industry vehicle production. The automotive total addressable market (TAM) for Intelligent Systems alone is expected to grow from ~$70 billion in FY 2025 to $95 billion by FY 2030E. Further, RemainCo is expected to enter non-automotive markets such as aerospace & defense, telecom infrastructure, and industrial automation. These markets are each expected to grow faster than automotive and help reduce cyclicality in the company’s revenue profile with the total market value projected to reach $155 billion by FY 2030E. With the EDS segment removed, RemainCo’s financial profile becomes more aligned with higher-growth technology platforms rather than a traditional automotive component manufacturing business. RemainCo is expected to generate $12.8-$13.2 billion in revenue in FY 2026E with an adjusted EBITDA margin of ~18.6%.

Over the medium term, management expects compound annual revenue growth (CAGR) of 4%-7% between FY 2025-2028E for RemainCo, with ~200 bps of EBITDA margin expansion. Margin expansion is expected to be driven by a product mix moving toward high-margin software & services, scale benefits in advanced electronics, and structural cost improvements through footprint/network optimization and digital manufacturing initiatives. For Versigent, revenue is expected to grow at a 3%-4% CAGR between FY 2025-2028E, with EBITDA margins expanding by ~200 bps over the same period driven by manufacturing efficiency initiatives, supply chain optimization, automation, and improved product mix associated with high voltage electrical architectures required for electric vehicles.

In our view, the separation also serves to improve capital allocation transparency. To that end, Aptiv intends to use ~$1.6 billion in proceeds from the Versigent spin dividend to reduce debt, targeting a gross leverage ratio in the range of 2.0x-2.5x following the transaction. With a strengthened balance sheet and improved free cash flow generation, RemainCo will be positioned to fund organic technology investments, pursue selective bolt-on acquisitions, and return capital to shareholders through a balanced combination of dividends & share repurchases. In contrast, Versigent’s capital allocation priorities as an independent company are expected to focus on operational efficiency, footprint optimization, and cash flow generation.

Further, again, in our view, the transaction addresses the structural conglomerate discount that has historically affected Aptiv’s valuation multiple. Prior to the spin-off, the market, in our estimation, effectively valued the company as a hybrid automotive supplier, blending the high-growth software and computing businesses with the low-margin wiring harness manufacturing segment. By separating the two operations, investors will be able to evaluate each business on its own merits and better focus their own capital allocation. All told, RemainCo becomes a more pure-play advanced automotive technology platform with higher margins, stronger intellectual property positioning, and greater exposure to long-term software-driven automotive trends while Versigent emerges as a scaled global supplier of electrical architecture solutions with stable OEM relationships and a clear pathway to operational margin improvement.

While both companies remain exposed to external headwinds including automotive production cyclicality, global trade frictions, and near-term transformation costs associated with the separation, their more focused post-spin strategies position them to pursue distinct growth and capital allocation paths. Over the medium-to-long term, we discern the improved strategic clarity, enhanced financial transparency, and differentiated investment profiles should support stronger valuation frameworks for both entities, with the historical conglomerate discount applied to Aptiv’s consolidated structure now in the process of being diminished and/or eliminated.

For our part, we value Aptiv on a sum-of-the-parts (SOTP) basis, applying median EV/EBITDA multiples to management’s average FY 2026E guidance. To that end, post-spin Versigent is valued at ~$2.4 billion using a 4x multiple while RemainCo is valued at ~$18.3 billion, using peer-aligned multiples of 10x. Adjusting for net debt, pension liabilities, minority interest and investments results in a combined equity value of ~$20.7 billion, or $97.50 per share, implying ~39% upside from current levels.  In effect, Aptiv’s current valuation suggests that investors can acquire the RemainCo advanced mobility technology platform and receive the Versigent spin-off at little to no incremental cost.

On February 5, 2025, Becton, Dickinson and Company (NYSE: BDX), a global medical technology company headquartered in Franklin Lakes, NJ, announced that its Board had authorized management to pursue the separation of its Biosciences & Diagnostic Solutions (B&DS) business via, among other options, a spin-off, sale or Reverse Morris Trust (RMT) transaction, depending on what avenue was determined would unlock the most value for shareholders. At the time, the company indicated it would specify the transaction’s ultimate form by the end of F2025 (September-ending) and anecdotally aimed to complete any proposed transaction during C2026. Subsequently, on July 14, 2025, BDX announced a definitive agreement to combine its Biosciences & Diagnostic business with Waters Corp. (NYSE: WAT) in a Reverse Morris Trust (RMT) transaction valued at ~$17.5 billion (implying an ~19x pre-synergy 2025E EV/EBITDA multiple and a ~14x multiple inclusive of ~$345 million of synergies over 5-years).  BDX shareholders are expected to own ~39.2% of the combined company with existing WAT holders owning the remaining ~60.8% (based on a share issuance ratio of 0.64474, which, we note, may be adjusted at closing).  As well, BDX will receive a $4 billion cash distribution prior to the transaction’s completion, which is expected to occur in February 2026 as it has received all the regulatory and shareholder approvals necessary to proceed. [Note: Recall, BDX competed the tax-free spin-off of diabetes device maker Embecta Corp. (NASDAQ: EMBC) in April 2022.] 

Post-spin BDX (or New BDX), which, as a standalone, will be a “pure-play” medical technology company primarily focused (i.e., 90% recurring) on consumables in a $70 billion market that is estimated to have a long-term growth CAGR of ~5%, posted top-line organic growth of ~4% in F2025 (off a base of nearly $18 billion in F2024) and is expected to grow in the “mid-single digits” over the long-term amid the increased focus on its core healthcare provider & patient end markets.  On the other hand, New Waters, a scaled life sciences & diagnostics concern, is expected to debut with 2025E sales of ~$6.5 billion and adjusted EBITDA of ~$2.0 billion projected to post compound annual top-line growth in “mid- to high-single digit” (specifically targeted at “7%”) and an adjusted EPS CAGR in the “mid-teens”.  On the cash flow front, New Waters expects the combined company will have a cash-generation profile in-line with standalone pre-spin Waters with 20% of sales converting into free cash flow (FCF) in 2026 and improving to ~25% by 2029.  In the aggregate, the achievement of New Waters’ plans portends total combined company sales of ~$3.0 billion in 2030 and $3.3 billion of adjusted EBITDA (based on an adj. operating margin of ~32%). 

On a pre-spin basis, while we have been anecdotally positive on the transaction at lower levels we take an initial NEUTRAL stance on pre-spin BDX shares given the implied upside to our $24 fair value estimate.  Post spin, while there is no obvious indexation angle embedded in this transaction as both BDX and WAT are included in the S&P 500 index (and are very likely to remain). [Note: at BDX the top 4 shareholders, Vanguard, Blackrock, T. Rowe, and State St. collectively own ~89.2 million shares or ~34.75% of the shares while at WAT Vanguard, Blackrock and State St. own ~15.5 million shares or ~26% of the outstanding shares]. That said, it seems reasonable to suggest that new Waters could see some initial shareholder-related rotation and investors may take a wait and see approach in regard to initial expectations, the final allocation of shares and the achievability of the company’s medium-term synergy projections.  As well, for post-spin BDX, whose stock we perceive to be reactive to small differentials in organic growth the current pocket of below-trend growth due to pronounced weakness in several small (i.e., 10% of sales) areas (e.g., China & vaccines), may present a variable for nearer-term volatility (although we think any prolonged weakness in shares will likely be met with more aggressive share repurchase activity and potentially present attractive potential upside as the cleaner mid-single digit growth profile re-emerges in F2027-F2028) 

All told, we think new investors are afforded the luxury of awaiting more compelling buying opportunities in both New BDX and New Waters, post-spin. To that end, we will monitor shares of both post-spin companies for potentially attractive entry points.

PCS Research Group welcomes and encourages your feedback.  Please feel free to call us if we can be of service.

On November 20, 2024, Comcast Corporation (NASDAQ: CMCSA) announced plans to spin off 100% of a select group of its Cable Television Network assets, which will include a portfolio of news (e.g., CNBC, MSNBC & USA), sports (e.g., USA & The Golf Channel), entertainment (e.g., E!, USA, SYFY & Oxygen) and digital (e.g., Fandango, Rotten Tomatoes, GolfNow & Sports Engine) properties, into a new, standalone, publicly traded company via a tax-free spin-off to shareholders.  The new independent company, which will go to market as Versant Media Group (which is a mix of “versatility” & “conversant,” aimed at emphasizing the company’s “versatility and its familiarity with multiple subjects”), will trade on the NASDAQ Stock Market under the ticker “VSNT.”  The transaction is expected to be completed after the market close on January 2, 2026, with regular-way trading commencing on January 5, 2026.  Shareholders of record will receive one share (either Class A or B) of VSNT for every 25 shares (again, of either Class A or B) of CMCSA stock owned.

Currently, pre-spin Comcast broadly reports two segments: 1) Connectivity & Platforms (~64.5% of consolidated sales and ~83% of adj. EBITDA in 2024), which itself is comprised of two divisions, namely Residential Connectivity & Platforms and Business Services Connectivity; and 2) Content & Experiences (~35.5% of sales and ~17% of adj. EBITDA in 2024), which includes three divisions, including Media, where the cable assets to be separated are currently housed, Studios, and Theme Parks.  On a consolidated pre-spin basis, CMCSA generated $123.7 billion of revenue in 2024 (compared with $121.6 billion in 2023) and $38.1 billion of adj. EBITDA (compared with $37.6 billion in 2023).  In the first nine months of calendar 2025, the company posted consolidated sales that were roughly flat at $91.7 billion, while adj. EBITDA rose nearly 4% to ~$31.3 billion. For its part, Versant (i.e., SpinCo) generated pro forma sales of ~$7.1 billion, down ~5% year-over-year, with adjusted EBITDA of ~$2.4 billion.  (In terms of guidance, for full year 2025, sales are expected to decline ~6% to $6.6 billion, with adjusted EBITDA and free cash flow (FCF) down ~10% and ~15%, respectively, to $2.15 billion and $1.375 billion.  Additionally, for full-year 2026, VSNT sales are expected to decline an incremental 3%-7% to $6.15-$6.4 billion, with adjusted EBITDA down ~7%-14% to $1.85-$2.0 billion and adjusted FCF of $1.0-$1.2 million.  

To state the obvious, at less than 6% of consolidated sales and adj. EBITDA, Versant comprises just a minor portion of CMCSA’s overall portfolio.  Moreover, it also seems evident that a substantial disparity in its relative size as compared with its soon-to-be-former parent, which, we note, is (and will remain) a member of the S&P 500 Index, will exist upon initial trading, portending a logical degree of initial shareholder rotation (with the so-called “Big 3” passive managers collectively owning roughly 870 million shares or almost 24% of pre-spin CMCSA).  Also, beyond the standard rationale of increased strategic/management focus, improved/tailored capital allocation and allowing investors to better focus their investment dollars, it seems reasonable to suggest that, at least from the parent’s perspective, the impending transaction is aimed at separating what could be deemed as “legacy” cable assets, which have broadly been under pressure amid the ongoing “cord cutting” trend among consumers, as well as a rapidly changing operating/competitive landscape; this has, in our view, only reinforced the wide investor perception that these type of assets are in secular decline.  In that context, the transaction seemingly allows the post-spin parent to concentrate on what it views as six core growth drivers, of which three are tied to “connectivity,” including wireless, broadband and business services, and the remainder being more “content” (or “experiences”) focused, such as theme parks, streaming and the studio business.  So, while the VSNT divestiture can be expected to be accretive to post-spin CMCSA’s top-line growth profile, it should be noted that the so-called “legacy cable networks” are solidly profitable (with a margin profile, at ~40%, which, we note, compares favorably with peers) and generate robust cash flows.  This, along with a balance sheet that is expected to be initially levered at ~1.0x, could position the company to participate in industry consolidation opportunities (amid what we discern is viewed by both corporates & investors as a less stringent regulatory regime), as well as capital returns to shareholders via both dividends and share repurchases.  (On that latter front, the company contemplates a dividend equal to ~20% of FCF and a potential initial share repurchase program of ~$1 billion subject to Board approval.)  All that said, we still find it difficult not to think that the impending transaction sets free a relatively sub-scale business into an industry with durable structural headwinds/issues (a contention that we note, in all fairness, is disputed for a variety of reasons that will be discussed by the incoming management team, which will be led by Mark Lazarus, formerly the Chairman of NBC Universal Media Group, with David Novak, a current CMCSA Board member as well as the co-founder and former Chairman & CEO of YUM! Brands, serving as the Chairman of VSNT’s 10-member unstaggered Board).

Thematically, it does not seem hyperbolic to point out that the broader telecom/media space is in the midst of an evolving/challenging period that, in our view, bears caution/patience ahead of the impending transaction.  From a valuation perspective, the bulk of post-spin CMCSA undoubtedly lies in the Connectivity & Platforms segment, which could be compared with peers, such as AT&T (NYSE: T), BCE Inc. (NYSE: BCE), BT Group (BT/A LN), Charter Communications (NASDAQ: CHTR), Frontier Communications (NASDAQ: FYBR), Lumen Technologies (NYSE : LUMN), Optimum Communications (NYSE:OPTU), Rogers Communications (NYSE: RCI), T-Mobile (NASDAQ: TMUS), and Verizon Communications (NYSE: VZ), which trade, on average, at ~6.5x 2027E EV/EBITDA (in a range of 5.5x-8x) while the Content & Experiences segment, including SpinCo, the media assets remaining with the parent as well as the studios and theme parks businesses, could, to varying degrees, be compared with Fox Corp. (NASDAQ: FOX), Disney (NYSE: DIS), Paramount Skydance (NASDAQ: PSKY), and Warner Bros. Discovery (NASDAQ: WBD), which is famously in the midst of a bidding war (between Netflix and Paramount), as well as Six Flags Entertainment (FUN), Madison Square Entertainment (MSGE) and Vail Resorts (MTN), which trade, on average, at ~9x 2027E EV/EBITDA (excluding outliers, such as Netflix and the Sphere).  For its part, CMCSA’s stock has traded with forward average EV/EBITDA multiples ~5.75x, 6.5x, 7.35x and 7.75x, respectively, over the last 1-, 3-, 5-, and 10-year periods. 

On pre-spin sum of the parts basis, we fairly value CMCSA at $30 per share, consisting of $28 per share for the parent and $2 per share for VSNT.  On a post-spin basis, reflecting the one for twenty-five share distribution ratio, shares of Versant are valued at ~$49 per share (based on a diluted share count of ~156 million).  All told, while the pre-spin valuation, at ~5.0x, admittedly does not appear overly demanding, we think it prudent to maintain a NEUTRAL stance ahead of the transaction given industry headwinds and the potential for a degree of post-spin volatility.  However, we will actively monitor shares of each entity for potentially attractive entry points in initial trading.

PCS Research Group welcomes and encourages your feedback.  Please feel free to call us if we can be of service.

In summary, we maintain a Neutral stance ahead of the upcoming demerger. Our Pre-spin fair value of ~£52.10 per share, implies ~11.8% upside from current levels. We view the separation of The Magnum Ice Cream Company (TMICC) as a strategically sound and a value-accretive step that serves to resolve some long-standing structural dis-synergies and enhances overall valuation transparency. TMICC is valued in line with the recently concluded investment by Goldman Sachs and the Abu Dhabi Investment Authority in Froneri (owner of Häagen-Dazs and Rowntree’s). Froneri is a joint venture between PAI and Nestlé and is the world’s second-largest ice cream producer after TMICC. At a 12.6x EV/EBITDA multiple, TMICC’s equity is preliminarily valued at ~£12.4 billion, while RemainCo is valued at £115.3 billion. Given the implied upside, we maintain a Hold recommendation for existing shareholders ahead of the spin-off, with valuation re-rating potential for RemainCo and upside optionality from the TMICC listing, contingent on strong execution and post-listing performance.  That said, we think incremental investors are afforded the option to await a potentially more tactically advantageous entry point (in either post-spin ULVR or MICC).

Unilever is expected to release its prospectus on November 5, which should include the pro forma financials, capital allocation, and final share-consolidation details. We will review and update our valuation framework once these disclosures are available.

On October 8, 2024, Honeywell International Inc. (NASDAQ: HON) announced plans for a tax-free spin-off of its Advanced Materials (AM) business into an independent, publicly traded entity, which will be named Solstice Advanced Materials and trade on the Nasdaq Stock Exchange under the ticker “SOLS”.  The transaction, which does not require shareholder approval, is expected to be completed on October 30, 2025.  [Note: In conjunction with the impending separation, SOLS held an investor day in New York City on October 8, 2025, which we attended and will provide anecdotal color on, including verbal 2025E and medium-term guidance commentary, in the post-spin Solstice section of this report.]  Shareholders of record will receive one share of SOLS for every four shares owned of Honeywell, which will continue to trade under the same listing and maintain the current corporate moniker. Separately, in addition to the impending Solstice transaction, on February 6, 2025, Honeywell announced plans for the tax-free separation, of its remaining Automation and Aerospace businesses, which is targeted for completion in 2H 2026, subject customary conditions, including the filing & effectiveness of a Form 10 registration statement with the Securities & Exchange Commission (SEC), the receipt of various regulatory approvals and final consent of HON’s Board of Directors.  For a degree of perspective on the decision to ultimately separate into three independent companies, rather than two, we would note that in November 2024, activist-investor Elliott Investment Management issued a public letter to HON’s Board indicating it had made “a more than $5 billion” investment in the company (which, by our estimation, put them in the upper half of the top 10 institutional shareholders), suggesting, among other things, the further separation of HON’s Aerospace & Automation businesses.  Subsequently, in May 2025, the two parties entered into a so-called cooperation agreement where HON’s 11-member Board was expanded by one to include Marc Steinberg, a partner at Elliott, as a new independent director.

For context, DuPont has been actively engaged in a portfolio transformation in recent years focusing on what management views as three “compelling megatrends”, specifically automation, aviation and the global energy transition, which precipitated the spin-offs of its home business, Residio (NYSE: REZI), and its transportation systems (i.e., turbochargers) business, Garrett Motion (NASDAQ: GTX), in 2018.  More recently, the company has also made both acquisitions (e.g., CCC, SCADAfence, Access Solutions, Civitanavi, CAES Systems Air Products LNG, Sundyne, Catalyst Technologies, Li-Ion, and Johnson Matthey’s CT business) & divestitures (e.g., PPE, Bendix as well as on-going strategic evaluations for PSS and WWS) in pursuit of its stated ends, ultimately culminating in the aforementioned separations, which will create three standalone Aerospace, Automation and Advanced Materials businesses.

For its part, Solstice (currently the Advanced Materials portion of HON’s Energy & Sustainability Solutions segment) generated ~$3.8 billion of sales in 2024, split roughly 70%/30% between Refrigerants & Applied Solutions and Electronics & Specialty Materials, with adj. standalone EBITDA of nearly $1.0 billion (on a margin of 26.4%).  For 2025E, the standalone company is anecdotally projected to post annual sales of $3.75-$3.85 billion with a projected EBITDA margin of ~25%, implying, by our calculation, adj. 2025E EBITDA of ~$935-$965 million. RemainCo (or NewHoneywell), which includes the Aerospace segment as well the broader Automation business (including the UOP portion of HON’s current E&SS segment) will be comprised of two segments each generating roughly ~$17 billion of sales and ~$4.5-$5.0 billion of segment-level adjusted EBITDA.  

In terms of post-spin leadership, Solstice will be led by current head of the Advanced Materials (AM) business David Sewell (formerly the CEO of Westrock) who will assume the president & chief executive officer (CEO) roles as well as join SOLS’s 10-member board, which will be chaired by Dr. Rajeev Gautum (the retired head of HON’s former Performance Materials & Technology business).  Tina Pierce, the AM segment’s current finance chief has been named SOLS’s chief financial officer (CFO).  Current, HON CEO, Vimal Kupur will maintain his position post-spin (but ultimately go with the Automation business following the Aerospace separation where the company is continuing to evaluate internal and external candidates for post-spin leadership although one could postulate that the current Aerospace business head, Jim Currier, would be in the “pole-position” to take the helm).  

For context, this transaction comes within the backdrop of both company specific activist-investor pressure as well as a seemingly broader apathy on the part of investors toward so-called “multi-industry” conglomerates, such as HON.  To that end, it is notable to point out that Dupont is on the verge of completing a step in its own journey toward a simpler, more focused portfolio with the impending spin-off of Qnity Electronics while a long-list of other companies have generated substantial overall shareholder value by reducing complexity in recent years, including, among others, Danaher, GE, United Technologies, Tyco, Ingersoll Rand, Johnson Controls, Pentair and ITT. In that context, while we would assert that the impending spin-off of Solstice will be an incremental positive when considering the obvious size disparity between SpinCo & RemainCo the transaction is likely to represent just the opening salvo in a wider value unlocking process that will stretch into late-2026/early-2027 with other impending portfolio actions, including the potential monetization of PSS and WWS, which will simplify the future standalone Automation company, as well as the planned spin-off of the Aerospace business and the latent potential for an initial public offering (IPO) of Quantinuum, representing other key milestones in a potentially significant multi-year re-rating process for legacy HON.  In this context, we assign a BUY rating to pre-spin shares of HON. On a sum of the parts basis, we fairly value shares of pre-spin HON at ~$245 per share, consisting of $16 per share for Solstice and $229 per share for NewHoneywell.  On a post-spin basis, reflecting the four-for-one distribution level, shares of Solstice are fairly valued at ~$63 per share (based on a diluted share count of ~160 million) with NewHoneywell at ~$229 per share (based on a diluted share count of ~641 million).  Given the implied upside, we, again, recommend a pre-spin purchase of HON shares but would note that we think it is possible that post-spin shares of Solstice, which may have longer-term opportunities to participate in potential industry consolidation, may struggle to gain initial traction while it accumulates its own individual shareholder constituency; to that end, it seems reasonable to assert that the bulk of current HON shareowners are likely primarily focused on the larger Aerospace and Automation businesses.  (In that context, while purely anecdotal and not necessarily a reflection of the current HON investor interest/sentiment in the standalone Solstice business we would note that attendance at SOLS’s investor day in NYC was, in our opinion, sparse.) 

On May 22, 2024, DuPont de Nemours, Inc. (NYSE: DD) announced its intention to separate into three independent publicly traded companies via the tax-free spin-offs of its Electronics and Water businesses. The separations were initially expected to be completed within 18-24 months of the announcement, subject to customary conditions, which notably did not include shareholder approval.  Subsequently, on January 15, 2025, Dupont indicated that it intended to accelerate the tax-free spin-off of its Electronics business but retain its Water business (which will remain paired with DD’s core Healthcare segment). All told, the tax-free spin-off of Dupont’s Electronics business, which will be named Qnity Electronics, Inc. and trade on the New York Stock Exchange (NYSE) under the ticker “Q” is expected to be completed on November 1, 2025 with regular-way trading commencing on November 3, 2025.  Shareholders of record, as of October 22, 2025, will receive one share of Qnity for every two shares of Dupont owned.  As of November 3, 2025, NewDupont will continue to trade under the same listing (NYSE: DD) and maintain the current corporate moniker.

For context, DuPont has a long history of acquisitions & divestitures, but in terms of the most relevant recent history, on July 1, 2015, Dupont completed the tax-free spin-off of its Performance Chemical segment into The Chemours Company (NYSE: CC).  Subsequently, on December 11, 2015, Dupont and The Dow Chemical Company announced plans for an all-stock “merger of equals” that would be called DowDuPont. Concurrently, the parties announced their intention to eventually (i.e., post-merger) split into three companies focused on Agriculture, Material Sciences & Specialty Products, respectively, via tax-free spin-offs.  The merger transaction officially closed on August 31, 2017, and the company ultimately completed the tax-free separations of Dow Inc. (NYSE: DOW), the Material Science business, in April 2019 and Corteva (NYSE: CTVA), the Agriculture business, in June 2019. In February 2021, standalone DuPont merged its Nutrition & Biosciences (N&B) business with IFF (NYSE: IFF) in a Reverse Morris Trust (RMT) transaction. During 2022, DuPont completed the divestitures of its Delrin acetal homopolymer (H-POM) business as well as the Mobility & Materials segment, which was purchased by Celanese Corp. (NYSE: CE) for ~$11 billion in November 2022. Next, as mentioned earlier, on May 22, 2024, Dupont announced its intention to separate into three independent publicly traded companies via the tax-free spin-offs of its Electronics and Water businesses (within 18-24 months).  That said, on January 15, 2025, Dupont subsequently indicated that it intended to accelerate the tax-free spin-off of its Electronics business but retain its Water business (which will remain paired with DD’s core Healthcare segment).  Most recently, on August 29, 2025, DD announced an agreement to sell its heat-resistant fiber business, Aramids, which includes both the Nomex and Kevlar brands, to Arclin, a portfolio company of TJC (formerly The Jordan Company) for ~$1.8 billion (comprised of ~$1.2 billion in cash, a note receivable of $300 million and a 17.5% equity stake valued at $325 million). 

Post-spin, NewDuPont, including the impending sale of Aramids, is expected to generate ~$6.9 billion in 2025E sales, which are roughly evenly split between the Water & Healthcare and Diversified Industrial businesses, with adj. operating EBITDA of ~$1.6 billion (or a margin of ~23.6%) while Qnity Electronics is expected to post 2025E sales of ~$4.6 billion, again, roughly split between Semiconductor Technologies and Interconnect Solutions, with adj. operating EBITDA of ~$1.4 billion (or a margin of ~30%).  Beyond the standard rationale of improved management/strategic focus, enhanced operational flexibility, optimized capital structures & capital allocation policies, one could summarily characterize NewDupont as the slower-growing concern, at least from a top-line perspective (i.e., 3%-4%) and lower-margin (i.e., ~23.5%), albeit with less capital intensity (i.e., cap ex at 3% of sales and free cash flow conversion of ~90%). Also, it will have a higher level of committed capital returns (i.e., a dividend payout ratio of 35%-45%), as well as a lower leverage profile (i.e., less than 2.0x). Also, NewDupont expects to maintain an investment grade credit rating (i.e., BBB+) and is a component of the S&P 500 Index. 

In comparison, Qnity is the relatively higher growth, higher margin business (i.e., 6%-7% and ~30%, respectively), albeit with a higher expected leverage profile (i.e., closer to 3.0x), as well as a lower committed shareholder return profile (i.e., a ~10% dividend payout ratio and a free cash flow conversion ratio of ~65%) and a non-investment grade (i.e., BB+) credit rating.  (Just as an aside, simply for context and clearly, not a statistically significant indicator of overall investor sentiment or early trading activity, we would note that the Qnity presentation at DD’s recent investor day was noticeably better attended than the earlier NewDupont portion of the event.)

In terms of leadership, post-spin Dupont will continue to be led by DD’s current chief executive officer (and former chief financial officer) Lori Koch, as well as DD’s current CFO, Antonella Franzen.  Jeroen Bloemhard, currently the general manager of the Water business (who joined from Dow Corning in 2018) will lead the Healthcare & Water Protection business, and Beth Ferreira, who recently joined the company in July 2025 following stints at Illinois Tool Works and IMI Plc, will be President of the Diversified Industrials business. For post spin Qnity, Jon Kemp, who served as the head of DD’s previous Electronics & Industrial segment since August 2019, will assume the helm of standalone SpinCo, as well as join the Board of Directors, with Mr. Matthew Harbaugh (formerly of Vantive, Baxter International’s former kidney care business) joining as the chief financial officer (CFO).  Mr. Mark Blinn, the former CEO & CFO of Flowserve Corp., will assume the Chairman of the Board role while current DD Board members Terrence Curtin, Kristina Johnson and Steven Sterin will also be joining the 9-member Qnity Board, which we note will have a staggered three-class election structure. 

On a sum-of-the-parts basis, we fairly value pre-spin DD at ~$96.50 per share, consisting of ~$48 per share for Qnity and ~$48.50 per share for NewDupont. On a post-spin basis, reflecting a 1-for-2 distribution ratio, shares of Qnity are fairly valued at ~$96 per share (based on a diluted share count of ~210 million) with NewDupont at ~$48.50 per share (based on a share count of ~420 million).  Given the implied upside to our fair value estimates, along with our expectation of a relatively orderly debut for both companies (given their size and overall market visibility) our pre-spin recommendation is BUY.