Please see the attached Hidden Opportunities Update on Cognyte Software (NASDAQ: CGNT).

CGNT posts in-line F2021 results and backs previously articulated F2022 guidance implying top-line growth of ~10% with normalized adj. EBITDA growth of ~14%; fair value remains $34 per share

• This morning, in its first quarterly report as a standalone public company following its spin-off from Verint Systems (NASDAQ: VRNT) on February 1^st, CGNT posted full-year F2021 sales and adj. EBITDA of $447 million and $89 million, respectively (compared with guidance of $445 million and ~$90 million.)  Roughly 85% of sales came from software (versus prior commentary forecasting ~84%) and gross margin was 71.1% (compared with prior guidance of ~70%).
• For F2022, the company backed its previously articulated outlook calling for full-year sales growth of ~10% to $490 million with adjusted EBITDA and EPS of $85 million and $0.80, respectively. Cash taxes and the diluted share count are expected be “slightly higher than 10%” and 70.25 million, respectively. (Note: F2022 results include ~$15 million of public company infrastructure costs, implying normalized adj. EBITDA growth of ~14%.)
• For 1Q F2022, management expects sales to grow 10%-12% to $113-$115 million with adj. EPS of “at least $0.15”.  In terms of the quarterly revenue cadence during the remainder of the year, CGNT anecdotally expects top-line growth to be slightly less than 10% in 2Q and 3Q and roughly 10% in 4Q F2022.
• The company ended F2021 with cash & equivalents of $78.6 million, restricted cash of $27 million and short-term investments of $4.7 million.  The company carried no long-term debt (but does have a current liability of $38.8 million due to its parent company, VRNT).
• Fair value remains $34 per share, implying more than 30% of incremental upside, based on a 23x multiple on January-ending F2023 adj. EBITDA of $99.5 million as well as projected net cash of $105.5 million (see Exhibit #1 on page 2). For context, this valuation scenario implies a 2023E EV/sales multiple of ~4.25x and, if based on F2024E estimates, implies EV/sales and EV/EBITDA multiples of roughly 3.75x and 19.0x, respectively.

Please see the attached Hidden Opportunities Update on XPO Logistics, Inc. (NYSE: XPO).

DSV Panalpina’s purchase of Global Integrated Logistics (GIL) at 23x trailing-EV/EBIT could help inform GXO’s initial market valuation; fair value for pre-spin XPO remains $159 per share

• This morning, DSV Panalpina (DSV DC) announced the purchase of Global Integrated Logistics (GIL), a carve-out from Agility Warehousing (AGLTY KK), which, among other things, operates 1.4 billion sq. meters of contract logistics space, for ~$4.2 billion or 0.94x trailing 12-months (TTM) sales and 23.2x TTM adj. EBIT.
• In our estimation, this transaction could provide a positive benchmark for comparison in the market’s initial valuation of GXO Logistics, the contract logistics arm of XPO, which operates ~200 million sq ft. of warehouse space and is expected to be spun-off in 2H 2021.
• For context, our current fair value estimate of $159 per share for pre-spin XPO, which suggests ~20% of incremental upside from current levels, values GXO at an implied EV/EBIT multiple of ~16x (or ~9.5x EV/EBITDA).
• To that end, we see incremental upside if the standalone contract logistics business were to initially trade more in-line with this deal and/or higher-valued public peers, such as DSV and Kuehne + Nagel (KNIN SW).
• Unrelatedly, we would remind investors that in his recent Chairman’s letter, XPO’s CEO, Brad Jacobs, indicated “a high degree of confidence” that the company would “make or beat” its full-year adj. EBITDA guidance, which calls for growth of 24%-29% to $1.725-$1.8 billion. The company also indicated that it was “very much on track to deliver at least $1 billion of adjusted EBITDA in 2022”.
• Fair value remains $159 per share, reflecting $111 for XPO/Trans. based on a blended multiple of 12.5x on 2022E EBITDA, inclusive of pro rata corp. costs and net debt, and $48 for GXO/Logistics based on a 9.5x multiple (see Exhibit #1 on page 2). As such, we continue to view the impending spin as a value unlocking catalyst.

Please see the attached Hidden Opportunities Update on OneSpan Inc. (NASDAQ: OSPN). 

OSPN files proxy for June 9^th Annual Meeting, defends strategy & structure in urging shareholders to vote for its slate of existing directors (vs. Legion’s); indicates bids for its e-signature business were reviewed (and rejected) in 2020

• Yesterday evening, OSPN filed its proxy for the upcoming Annual Meeting on June 9^th; in it, the company defends its strategic transition to a primarily software-based solutions company while also labeling the on-going inclusion of the hardware business in its portfolio as “both financially and strategically critical”.
• In that context, the company urges its shareholders to support its current slate of existing directors, including the four members, specifically Mr. John Fox, Ms. Jean Holley, Mr. Matthew Moog and Mr. Marc Zenner, that activist-shareholder Legion Partners, a 6.9% holder, is seeking to replace. (Recall, on March 15^th, Legion filed its own proxy nominating four, new independent directors.)
• OSPN contends that its longer-serving directors, namely Mr. Fox (15 years), Ms. Holley (14) and Mr. Moog (8), bring needed institutional knowledge to a Board that has been largely refreshed in recent years and have been instrumental in its strategic evolution (which has seen recurring revenue grow from 22% of sales in 2015 to 62% in 2020 as well as a doubling of its stock price over the last 3-years.)
• On the strategic alternatives front, management (in conjunction with the Board’s Finance & Strategy Committee) indicates it  regularly explore its options, including mergers, acquisitions and divestitures; in fact, the company indicated that, in 2020, it had retained advisors and reviewed 35 potential buyers (of which 8 signed non-disclosures) for its fast growing e-signature business, OneSpan Sign, but ultimately deemed all firm offers were “inadequate” (relative to the value that could be created from executing on its current growth plans for the business).
• We maintain our current fair value estimate of $34.50 per share, which values OSPN’s Hardware business at 2.5x 2022E EBITDA, applies sales multiples of 1.0x and 8.5x to the company’s legacy/non-recurring licensing and core/recurring software & services businesses, respectively, and accounts for ~$100 million of projected net cash (see Exhibit #1 on page 2).

Attached, please see The Spin-Off Report Update on Cognyte Software Ltd. (NASDAQ: CGNT).

Upgrade shares of CGNT to BUY (from NEUTRAL); Maintain Fair Value Estimate of $34 per share

• Cognyte Software Ltd. (NASDAQ: CGNT) is the cyber intelligence business that was spun-off from Verint Systems Inc. (NASDAQ: VRNT) on February 1, 2021.
• Shares have declined more than 15% since its initial debut in the when-issued market at $30 per share (versus an about 10% increase in the S&P 500) as well as the average price during its first week of regular-way trading, which ranged between $28.01-$31.54.
• In our view, this decline could be attributable, in part, to a range of factors, including investor churn/the exit of a few large holders (due to mandate/benchmark conflicts) as well as the company’s somewhat muted near-term outlook, which on its face forecasts a ~5.5% decline in January-ending F2022 earnings but is wholly due to $15 million of post-spin public company infrastructure costs. As such, on a normalized basis, F2022 growth would be in the low-teens with the expectation for an acceleration into the mid-teens in F2023 and 20% in F2024.
• Other factors could include investor angst surrounding the inherent vagaries of the company’s customer base and services, which are focused on the law enforcement and national security sectors, as well its transition to a software-centric operating model. In terms of the latter, we view the heavy lifting on its transition as substantively complete and think the corresponding increase in recurring revenue, which is now ~50% of sales, should be a mitigating factor toward the historical view that CGNT’s business is less predictable/lumpier than VRNT’s core customer engagement business.
• All told, at 16.5x F2023 EV/EBITDA and ~3.0x F2023 sales the shares trade at a significant discount to peers, and we think offer an attractive entry point into a company with a clean balance sheet and a strong position in a growing sector, which can support 15%-20% growth in earnings and free cash flow in F2023-F2024.
• As well, we think the fragmented security analytics sector is likely to see additional consolidation over the longer-term.
• Our fair value estimate for CGNT remains $34 per share (see Exhibit on page 2), based on a 23x multiple on F2023 EBITDA of $99.5 million and projected net cash of $105.5 million, which implies ~35% of potential upside.
• For additional information, please refer to The Spin Off Report dated October 20, 2020 and Updates from January 15, 2021 and February 2, 2021.

ALERT: JCOM to Spin-Off Cloud Fax Business

On April 19, 2021, after the market close, J2 Global Inc. (NASDAQ: JCOM) announced that the company plans on spinning-off its secure data exchange business, which is primarily focused on the healthcare sector, creating a end-to-end solution for healthcare interoperability. The separation will be accomplished via a distribution of at least 80.1% of shares in the new company, which will adopt the corporate moniker Consensus, and is expected to be completed in 3Q 2021.

Completion of the separation is subject to standard closing conditions, including Board approval, receipt of a private letter ruling from the IRS, a tax opinion from counsel, and an effectiveness declaration of the company’s Form 10 filing with the SEC. J2 expects to retain a 19.9% ownership stake in Consensus, which the company plans to divest over time in a “tax-efficient manner”.

J2 Global describes itself as “a leading provider of internet information and services” and generated $1.5 billion in revenue and $616 million in EBITDA in 2020. The company operates under two main businesses, Digital Media, and Cloud Services. Digital Media, which accounted for ~54% of 2020 revenue and ~49% of 2020 adjusted EBITDA, operates a portfolio of web properties focused on technology, shopping, gaming, and healthcare markets. The digital properties generate revenue primarily from advertising and sponsorship. Well known websites owned by JCOM include IGN, Speedtest, and Mashable, amongst others and generated approximately 9.1 billion visits and 31.5 billion page views in 2020. Cloud Services, 46% of 2020 revenue and 51% of 2020 adjusted EBITDA, provides cloud-based subscription services that include fax, cybersecurity, privacy, and marketing technology. Services include eFax, IPVanish, and eVoice, amongst others.

In terms of rationale, the separation appears to make sense in terms of splitting a higher growth, lower margin business from the more stable growth and higher margin, free cash flow generation business that serve differing end markets. Additionally, following the separation the two stand-alone companies will have clearer public comparable peers, versus the current conglomerate structure.

 
PRELIMINARY VALUATION

The standalone Consensus business will be comprised of the Cloud Fax business, which is currently operating within the Cloud Services segment. Cloud Fax is a leading secure data exchange platform, that is increasing focused on secure interoperability between differing systems within the healthcare industry via the company’s scalable SaaS platform. On a pro-forma basis it is expected that Consensus will generate $333 – $342 million in revenue, which represents approximately 2% year-over-year sales growth, in line with the businesses five-year CAGR, and operate with an EBITDA margin of 55%. Given the high margin profile, and resultant free cash flow conversion, Consensus will carry net debt to EBITDA of up to 4x, with free cash flow being used to delever the balance sheet.

Following the separation, J2 Global will be focused on its vertically integrated internet platforms (tech & gaming, health, shopping, and cybersecurity) and will exhibit a higher degree of top line growth, with lower margins than Consensus. On a pro-forma basis, post-spin, J2 is expected to generate $1.297 – $1.334 billion in revenue and approximately 35% EBITDA margin in 2021. The revenue growth guidance implies ~20% year-over-year growth, which is fueled by both organic growth and the benefits of past acquisitions. For reference, on a pro-forma basis, J2 ex-Consensus, has exhibited a revenue CAGR of approximately 29% since 2013. The parent company has invested $2.4 billion in more than 70 acquisitions since 2013, and it would be expected to continue an acquisition strategy following the separation. It is anticipated that the parent company will carry net debt to EBITDA of up to 3x.

Based on management’s revenue growth and margin commentary for 2021, it can be forecast that Consensus will generate $344 million in revenue and $189 million in EBITDA in 2022. Excluding Consensus’ contribution, J2 is forecast to generate $1.6 billion in revenue and $553 million in EBITDA in 2022. While the spin-off will leave some cloud services operations with the parent company, the company will be much more clearly comparable to other digital media/publishing companies, including serial acquirers, which on average trade at an average of approximately 15x 2022 consensus EBITDA. Applying a discounted peer multiple of 13.0x to the parent company implies an enterprise value of $7.2 billion following the spin-off. The spin company’s post-spin trading likely approximates the current JCOM trading multiple of 10x 2022 consensus EBITDA estimate. Applying a 9.0x estimate to forecasted EBITDA of $189 million results in an enterprise value of $1.7 billion. We apply a slight discount to the spin-company’s multiple to account for the loss of the 20% growth businesses that will remain with the parent.

On a pre-spin, sum-of-the-parts basis, we assign a preliminary fair value estimate of $164 per share to J2 Global when incorporating current net debt of $1.5 billion and 45.1 million shares outstanding.

Please see the attached Hidden Opportunities Update on Landec Corp. (NASDAQ: LNDC).

Quick update on some recent shareholder shifts & insider buying: “Activists” currently control ~26% of LNDC’s shares and 5 of 12 Board seats; the standstill agreement with Legion ends 30-days prior to the 2021 Annual Meeting’s nominating deadline

• This week, Wynnefield Capital, LDNC’s largest shareholder, increased its stake by ~258K shares to 3.14 million (or 10.72% of the outstanding shares); while not overtly “active”, Wynnefield is a longtime LNDC shareholder and a self-described value investor, specializing in U.S. small cap situations that have a company- or industry-specific catalyst. As well, its CIO, Nelson Obus, is on LNDC’s Board along with ally Andrew Powell.
• As well, in terms of insider buying this week, Lifecore’s President James Hall purchased 10K shares at $10.62 per share while LNDC’s CEO and CFO each purchased 9K and 2K shares, respectively. (For context, Mr. Hall’s ~$106K purchase compares with his annual F2020 salary of $350K. As well, we would note that in July 2020 LNDC adopted “change of control” severance provisions for all three of the aforementioned executives.)
• Additionally, in late-March, sometime-activist and self-described “suggestivist” Cove Street Capital increased its passive stake in LNDC by almost 500K shares to 1.6 million shares (or ~5.5%; see Exhibit #1 on page 2).
• Overlaying these data points, which are not necessarily material in and of themselves, is a broader context in which activist-investor Legion Partners, who owns 9.9% of LNDC and was awarded three Board seats (i.e. Jeffery Edwards, Patrick Walsh and Joshua Schecter) in a 2020 agreement with LNDC, will see the so-called standstill provisions of that agreement expire 30-days before the 2021 Annual Meeting’s nominating deadline (which, in our estimation, is likely in mid-May)
• Recall, Legion had previously publicly contended that Landec’s “odd combination of businesses” prevent the achievement of “full and fair value”, which it assesses could be ~$20 per share.
• Our fair value estimate remains $12.50 per share based on a blended multiple of 11x on F2022E EBITDA of ~$46 million and net debt, incl. Windset, of ~$140 million (see Exhibit #2 on page 2).

Please see the attached Hidden Opportunities Update on OneSpan Inc. (NASDAQ: OSPN).

Legion Partners, a 6.9% holder, pushes forward with a proxy contest after failing to reach a settlement with OSPN; fair value estimate remains $34.50 per share

• Legion Partners, which has increased its stake in OSPN to 6.9% (from 6.8% in January 2021 and its initial stake of ~5% in 2018) and is the company’s second largest institutional shareholder, indicates that it will move forward with its nomination of four independent directors for election to the company’s Board at the 2021 Annual Meeting (likely in mid-June).
• Per Legion, the decision to press ahead with a proxy contest, which was first unveiled in February 2021, comes after OSPN was unwilling to consent to a settlement agreement that seemingly included provisions for the immediate addition of three of its nominees and a commitment for moving ahead with a strategic review. (For context, Legion has previously pressed for a range of strategic actions, including the monetization of the Hardware business as well as other non-core assets, such as its e-signature offering, OneSpan Sign, which it estimates could ultimately unlock value of ~$43 per share.)
• Legion’s slate of nominees includes, Sarika Garg, the former chief strategy officer of Tradeshift (a business commerce SaaS platform), Sagar Gupta, the senior TMT analyst at Legion, Michael McConnell, a private investor with Board experience in the SaaS space, and Rinki Sethi, the chief information security officer at Twitter (NYSE: TWTR).
• In addition to the solicitation of proxies for its nominees, the activist-investor is supporting the other candidates that have been nominated by OSPN other than Mr. John Fox, Ms. Jean Holley, Mr. Matthew Moog and Mr. Marc Zenner (as to round out a full slate of nine directors).
• We maintain our current fair value estimate of $34.50 per share, which implies ~30% of incremental upside from current levels. For context, our valuation framework values OSPN’s Hardware business at 2.5x 2022E EBITDA, applies sales multiples of 1.0x and 8.5x to the company’s legacy/non-recurring licensing and core/recurring software & services businesses, respectively, and accounts for ~$100 million of projected net cash (see Exhibit #1 on page 2).

ALERT: DELL to Spin-Off VMware Ownership Stake

On April 14, 2021, after the market close, Dell Technologies Inc. (NYSE: DELL) announced plans to spin-off its 80.6% ownership stake in VMware Inc. (NYSE: VMW). The planned spin-off, which is expected to close in 4Q 2021, is subject to customary closing conditions including receipt of a favorable IRS private letter ruling and an opinion from counsel that the spin-off will qualify as tax-free to DELL shareholders. DELL shareholders of record are expected to receive 0.44 shares of VMware for each share of DELL owned. Following the separation, VMW will collapse its dual class share structure to a single class structure; DELL’s multi-class equity structure will remain in place.

In conjunction with the separation, VMW and DELL will enter agreements that preserve current technology co-development as well as sales and marketing activities in oroder to maintain the VMware sales that have historically be generated via DELL (approximately 31% of VMwares sales in F2021). Additionally, VMware will continue to use Dell Financial Services to help customers finance solutions. At the time of closing, VMware will issue a special cash dividend of $11.5 – $12.0 billion to all VMW shareholders, including DELL. It is estimated that DELL will receive approximately $9.3 – $9.7 billion, which management has stated will be used to pay down non-financial services debt toward garnering an investment grade credit rating.

Dell Technologies, a provider of computer hardware, software, and storage products as well as related services, reports two main operating segments: (1) Infrastructure Solutions Group (ISG); and (2) Client Solutions Group (CSG). The company currently has stakes in two publicly traded entities, namely cloud-player VMware (NYSE: VMW) and IT security firm Secureworks (NASDAQ: SCWX).

VMware provides desktop and data center virtualization solutions for desktop management, software development, and business continuity applications, amongst others. VMW generated $11.8 billion in revenue and $3.4 billion in EBITDA in F2021 (ended January). Dell gained control of VMware via its acquisition of EMC Corp. in 2016 (in 2004 EMC conducted an IPO of VMware selling approximately 15% of the company to the public).

The announced separation does not likely come as a surprise, as for several years investors have opined about the benefits of a spin-off and it was recently reported by The Wall Street Journal that the company may be exploring options for its stake in VMW, which it indicated could have potentially ranged from a spin-off of the stake to the purchase of the remaining VMW public shares.

In terms of rationale, management cites that a full separation would be beneficial to both companies as DELL would be able to improve its balance sheet and approach investment grade as it wll reduce DELL’s outstanding debt leverage ratio (i.e. net debt/adjusted EBITDA) to approximately 1.6x while retaining its strong collaborative relationship with VMW. For VMware, the spin-off and collapse of the capital structure increases the available float and potential shareholder audience in terms of index inclusion. Additionally, DELL shareholders will continue to own their proportionate share of VMW, allowing for upside participation in VMware’s future.

PRELIMINARY VALUATION

Following the separation, the valuation of DELL shares should become less complicated as the company turns into a hardware focused entity (as opposed to the current hardware/software valuation it currently receives). Dell’s operating businesses could be compared to a range of IT/computer peers, including Acer Inc. (2353 TT), Asustek Computer (2357 TT), Cisco (NASDAQ: CSCO), IBM (NYSE: IBM), Hewlett Packard Enterprises (NYSE: HPE), HP Inc. (NYSE: HPQ), Lenovo Group (992 HK), NetApp Inc. (NASDAQ: NTAP), and Seagate Technology (NYSE: STX), which trade at ~8.0x 2022E EV/EBITDA (albeit in a range of 5.2x-10.7x). For its part, excluding the VMW consolidation, shares of DELL currently trade at 5.6x trailing EBITDA.

On a pro-forma basis, in F2021 (January ended) the company would have generated $82.5 billion in revenue and $9.4 billion in adjusted EBITDA, representing an 11.3% margin. DELL appears poised to capitalize on increased IT spending as it is expected that the industry should grow in the mid-single digits in 2021 and roughly in line with GDP over the longer term. Assuming the company can generate 3% annual revenue growth, and estimating an 11% EBITDA margin, the company would generate $86.7 billion in revenue and $9.5 billion in adjusted EBITDA. Applying a discounted 7.0x multiple, post-spin DELL would be valued at $66.7 billion on an enterprise value basis. Accounting for post-spin net debt of $34.2 billion (estimated year-end F2022 debt of $43.7 billion and current cash ex-VMW), and current shares outstanding of 762.7 million, a post-spin fair value estimate of $43 per share is derived. Incorporating the 0.44 shares DELL stockholders will receive, on a sum-of-the-parts basis a pre-spin fair value estimate of $111 per share of DELL is derived.

Please see the attached Hidden Opportunities Update on Extended Stay America (NASDAQ: STAY).

STAY reiterates support of BX & Starwood’s $19.50 per share all-cash takeover in its preliminary proxy filing; close coverage, as of today’s market close

• Last night, STAY filed a preliminary proxy statement that reiterated the Board’s support for the $19.50 per share all-cash acquisition bid from Blackstone and Starwood, which is itself a 9.4% holder of STAY.
• From its perspective, STAY indicates the deal offers “immediate, certain and compelling value”; to that end, STAY highlights that the deal price represents a 51% premium to its pre-pandemic share price and premiums of 28%, 44% and 76% to its 3-, 6-, and 12-month VWAPs, respectively.
• On the valuation front, the transaction values STAY at 11.0x and 15.6x 2019 and 2020 EV/EBITDA, respectively, as well as 13.0x and 11.6x 2021E and 2022E EV/EBITDA (compared with its forward 12-month average over the last 5-years of 9.5x).
• Additionally, STAY indicates that its real estate footprint would likely require ~$750 million of capital investments over the next three years (and the deal removes any future “execution” risk).
• Lastly, the company indicated that had explored (and rejected) an OpCo/PropCo split and that its previous strategic reviews, which included solicitation efforts, had not resulted in any other credible bids.
• Notably, this proxy comes in the context of five shareholders, including Tarsadia, Hawk Ridge, River Road Asset, SouthernSun and Cooke & Bieler, which together own ~13% of STAY, having publicly expressed opposition to the deal as being insufficient and ill-timed considering the industry’s impending recovery.
• We would note that while the transaction has been approved by STAY’s Board and includes a non-solicitation clause as well as a $105 million termination fee, it does still require shareholder approval. That said, a date for the vote has not yet been scheduled.
• On that front, it should also be noted that several large, primarily passive shareholders, including Vanguard, Fidelity and BlackRock, which control ~19% of the shares, and have not yet publicly articulated their intentions regarding the transaction.
• All things considered, we will close coverage of STAY, as of today’s market close; for context, the shares retuned 97% since our initial recommendation in May 2020 (compared with a 47% increase in the S&P 500 and an 80.5% rise in the Russell 2000.)

Please see the attached Hidden Opportunities Update on XPO Logistics, Inc. (NYSE: XPO).

Chairman’s letter sounds bullish tone on the economic recovery broadly and XPO’s business lines specifically, which leaves confidence in meeting or beating its consolidated 2021E EBITDA guidance of $1.725-$1.8 billion (as well as its 2022E EBITDA target of $1 billion for LTL); fair value remains $159 per share

• This morning, in a letter to shareholders, XPO’s chairman and CEO Brad Jacobs struck a particularly bullish tone on the current economic recovery, which he described as an “accelerated V-shape” and one that could drive U.S. GDP growth of ~10% (compared with the current consensus forecast of ~6%).
• The company sees the current recovery as a boon to all three of its business lines, particularly LTL, which is more exposed to the industrial market, and truck brokerage. As well, the longer-term trends of e-commerce, outsourcing and automation look to be durable tailwinds at for its contract logistics business.
• Specifically, current trends leave Mr. Jacobs with “a high degree of confidence” that XPO will “make or beat” its full-year adj. EBITDA guidance, which calls for growth of 24%-29% to $1.725-$1.8 billion (compared to our initial $1.791 billion forecast and current consensus of $1.77 billion).
• As well, XPO indicated that along with supportive underlying fundamentals its internal optimization efforts have the LTL business “very much on track to deliver at least $1 billion of adjusted EBITDA in 2022”. For context, our full-year consolidated 2022E adj. EBITDA forecast of $1.975 billion, which compares with current consensus of $1.933 billion, reflects LTL segment adj. EBITDA of ~$945 million.
• On the spin-off front, the company indicates it is making “excellent” progress, ostensibly toward a 2H 2021 completion, as well as toward the pursuit of investment grade credit ratings for both soon to be standalone companies, which it noted is likely to be the case on “day one” for GXO and “followed” by XPO.
• Fair value remains $159 per share, reflecting $111 for XPO/Transportation based on a blended multiple of 12.5x on 2022E EBITDA, inclusive of pro rata corp. costs and net debt, and $48 for GXO/Logistics based on a 9.5x multiple (see Exhibit #1 on page 2). To that end, we continue to view the impending spin as a value unlocking catalyst.