Downgrade SOLS to NEUTRAL (from BUY) with Shares Trading Roughly In-Line with our FVE of $65 per share

For context, Solstice Advanced Materials Inc. (NASDAQ: SOLS) completed its tax-free separation from Honeywell International Inc. (NYSE: HON) on October 29, 2025; following our initial NEUTRAL recommendation shares declined ~13.5% (underperforming the S&P and Russell by 9.65% and 7.75%, respectively), amid both technical index-related & natural shareholder rotation factors, prompting our upgrade to BUY on 11/19/2025 (see Update), since which time SOLS shares have sharply rebounded ~53% (outperforming the S&P and Russell by ~49% and 41%%, respectively).

In our view, besides being oversold in the low-$40’s amid the lack of an initial shareholder constituency within the larger parent (i.e., a greater Aerospace & Automation focus) the stock has re-rated away from a valuation that was more aligned with lower-margin/commoditized & highly levered peers, such as Chemours (NYSE: CC), toward higher-valued peers, such as Entegris (NASDAQ: ETNG) and Element Solutions (NYSE: ESI).  Additionally, we perceive that shares have also benefited, as of late, from investor enthusiasm regarding the company’s defense (i.e., Spectra) and nuclear capabilities (i.e., SOLS is the sole domestic provider of uranium hexafluoride conversion services), which add additional levers to the company’s core refrigerant-centric growth/margin theme (i.e., data centers) and were, in our view, seemingly overlooked by existing/potential shareholders preceding SOLS’s debut.

That said, with shares currently trading in-line with our $65 fair value estimate (FVE) we think it reasonable/prudent to temper our previous bullish stance and lower our investment recommendation to NEUTRAL (from BUY).

In terms of guidance, recall management re-iterated its initial 2025E guidance on its most recent earnings conference call (see Exhibit 1), and its “Medium-Term” targets continue to call for low-to-mid single digit top-line growth, a mid-single digit adjusted EBITDA CAGR, and a free cash flow conversion ratio of greater than 70% (see Exhibit 2).  Capital expenditures are projected to be in the mid-single digits (down from ~10% in 2025E), as a percentage of sales, and the net leverage target is ~1.5x (roughly in line with current levels).

The company intends to report 4Q 2025 and full-year results before the market open of February 11, 2026 and hold a conference call to discuss the results that morning at 8:30 a.m. (ET).

In terms of valuation, our fair value estimate of $65 per share, reflects a blended multiple of ~12x on 2026E EV/EBITDA as well as projected net debt of ~$1.7 billion and a diluted share count of ~160 million (see Exhibit 3 and Exhibit 4 on pages 2 and 3).

Please see the Spin-Off Report dated October 14, 2025, and the Updates from 10/16/2025, 10/30/2025 and 11/19/2026 as well as the Reference section on pages 4-8, for more information.

IP to Split Into Two Geographically Focused Concerns within 12-15 Months; Tax Status is Uncertain

On January 29, 2026, International Paper Company (NYSE: IP), a global pulp, paper & packaging products provider, announced its intention to separate its North American (NA) and Europe, the Middle East & Africa (EMEA) businesses into two independent, publicly traded companies.  ReminCo will be comprised of both the legacy IP & DS Smith assets in North America while SpinCo, which will be led by Tim Nicholls (currently the EVP and President of DS Smith), will also include the EMEA-focused assets of both legacy IP as well as DS Smith.  The transaction, which is expected to be completed over the next 12-15 months (i.e., 1H 2027) is planned to be structured as a “spin-off”; that said, IP indicates that it intends to retain a “meaningful” (but as yet undetermined) stake in the company, which leaves the ultimate tax status dependent on the deal’s final terms (i.e., IP needs to spin-off at least 80.1% of SpinCo to qualify as “tax-free” under the U.S. federal income tax code).  [Note: IP completed the tax-free spin-off, while retaining a 19.9% stake, of its global printing paper business, Sylvamo Corporation (NYSE: SLVM), in October 2021.]  In terms of balance sheet commentary, management indicates the expectation that both standalone entities will maintain investment grade credit ratings (although, we note, that the ultimate individual dividend policies are still being evaluated).

The spin-off announcement, which management anecdotally indicated likely came as a “surprise” to many investors, comes in the context of the late-2024 implementation of its internal “80/20” strategic approach, which focused on reducing costs, optimizing allocating capital and increasing mill/supply reliability, as well as the ~$9.9 billion all-stock combination with DS Smith (formerly SMDS LN) in January 2025, which bulked up IP’s European presence as well as added a complementary box network in North America.  In terms of rationale for the spin, beyond the standard motivations, such as increased management focus, more targeted capital allocation and more tailored investment vehicles the main driver, at least in our anecdotal understanding, is primarily the unique operating/competitive landscapes in the U.S. and EMEA, which have relatively similar total addressable markets (i.e., $50B North America/$40B EMEA), but divergent long-term growth outlooks (i.e., 1%-1.5% NA/1.5%-2.0% EMEA), supply concentration (i.e., 80% NA/~50% EMEA), and competitive dynamics (i.e., NA is more integrated nationally with a more centralized customer base while EMEA is more localized by region).  All told, management indicates that the two businesses have de minimis operating “overlap” and require more bespoke go-to market strategies. 

The North American Packaging Solutions business (i.e., PS NA or RemainCo), is indicated to have generated~$15.175 billion of sales in 2025, up ~6% year over year, with adjusted EBITDA, ex-corporate costs, of ~$2.3 billion, up ~37% compared with 2024 (on ~400 bps of margin expansion to 15.7%), across a network of ~220 facilities in the U.S & Mexico, while the EMEA Packaging Solutions segment (i.e., PS EMEA or SpinCo) posted ~$8.45 billion of sales with adjusted EBITDA of $784 million (on a margin of 9.3%).  In terms of guidance, for full-year 2026E IP expects consolidated sales of $24.1-$24.9 billion with adjusted EBITDA of $3.5-$3.7 billion and free cash flow (FCF) of ~$300-$500 million. (Anecdotally, the company’s 2026E FCF guide compares with its annual dividend payout of ~$1 billion; that said, management is committed to maintaining its current dividend policy in 2026.)  By segment, PS NA is projected to post 2026E sales of $14.6-$15.0 billion with adj. EBITDA of $2.5-$2.6 billion while PS EMEA is forecasted to generate $9.5-$9.9 billion of sales with adj. EBITDA of $1.0-$1.1 billion in 2026E.  Longer-term, management has indicated that it “remains on track” to achieve its previously articulated 2027E adj. EBITDA target of ~$5 billion (on sales of ~$25.5 billion).

In terms of valuation, competitors to IP’s North American and EMEA businesses could include a wide range of players, such as Smurfit Westrock (NYSE: SW), which is the product of the July 2024 all-stock merger of Westrock & Smurfit, and Packaging Corp. of America (NYSE: PKG) as well as Amcor plc (NYSE: AMCR), which acquired Berry Global in April 2025, Clearwater Paper Corp. (NYSE: CLW), Greif, Inc. (NYSE: GEF), Graphic Packaging (NYSE” GPK), Mondi plc (MNDI LN), Sonoco Products Co. (NYSE: SON), Stora Enso Oyi (STERV FH), Suzano (SUZBC BZ), which unsuccessfully attempted to purchase IP for ~$15 billion in 2024, and UPM-Kymmene Oyj (UPM FH), which trade, on average, at ~7.0x 2027E EV/EBITDA (in a range of ~6.0x-10x).  On the M&A front, transactions in the packaging & container sector have, per Chain Bridge Research, averaged ~8.5x forward EV/EBITDA (in a range of ~7.5x-11x). 

Applying a blended multiple of ~7.5x to 2027E estimated EBITDA and accounting for projected net debt yields a preliminary sum-of-the-parts valuation of ~$23 billion or ~$43 per share (based on a diluted share count of ~530 million).

ETN to Separate its Mobility Group via a Tax-Free Spin-Off set for Completion in 1Q 2027

On January 26, 2026, Eaton Corporation plc (NYSE: ETN), a global “intelligent” power management company that is incorporated in Ireland but headquartered in Cleveland, OH, announced plans to spin-off its Mobility Group into a separate, publicly traded company via a tax-free spin-off that is expected to be completed in 1Q 2027, subject to customary conditions, including final Board approval. For context, the transaction, which management expects will be “accretive to Eaton’s organic growth and operating margin”, is a strategic step toward the company’s “2030 Growth Strategy” (described in more detail below) that also resulted in the divestitures of its Lighting and Hydraulics businesses in 2020 and 2021, respectively, and is ultimately aimed at sharpening ETN’s focus on its core Electrical & Aerospace businesses (where management sees attractive exposure to “powerful megatrends”, including electrification, digitalization/artificial intelligence (AI), reindustrialization, infrastructure spending and growth in aerospace & defense (A&D) demand, particularly in the after-market (on the latter front). The company intends to discuss the proposed transaction in more detail on its 4Q 2025 earnings conference call, which is scheduled for 11 a.m. (ET) on Tuesday, February 3, 2026.

Currently, Eaton operates five business segments: 1) Electrical Americas (~46% of consolidated 2024 sales and 56% of EBITDA); 2) Electrical Global (25% of sales and 19.5% of EBITDA); 3) Aerospace (15% of sales and 14.5% of EBITDA); 4) Vehicle (11% of sales and 9.5% of EBITDA); and 5) eMobility, which provides a range of engineered power solutions primarily to large original equipment manufacturers (OEMs) of auto, commercial and off-highway (e.g., construction) vehicle concerns  (3% of consolidated sales and ~0.5% of EBITDA in 2024).  In terms of near-term guidance, for full-year 2025E the company forecasts organic sales growth of 8.5%-9.5% with segment-level margins of 24.1%-24.5% resulting in adjusting earnings per share of $11.97-$12.17 (and GAAP earnings of $10.29-10.49 per share).  As it specifically relates to 4Q 2025, management projects organic top-line growth of 10%-12%, segment margins of 24.2%-24.6% and adjusted EPS of $3.23-$3.43 (with GAAP EPS of $2.75-$2.95). [Note: ETN expects to report 4Q 2025 and full-year 2025 results before the market open on February 3, 2026.]  Longer-term, the company’s so-called “2030 Growth Strategy”, which was laid out at an investor day in March 2025, targets compound annual (CAGR) organic growth of ~6%-9% as well 350-450 basis points (bps) of operating margin improvement over the next five years (i.e., 2024-2030), which management estimates will drive compound annual adjusted earnings per share (EPS) growth of >12%.

In terms of valuation, competitors to ETN’s core-Electrical business (i.e., Americas & Global) could include ABB Ltd. (ABBN SW) , General Electric (NYSE: GE), Honeywell International (NASDAQ: HON), Schnieder Electric (SU FP), Siemens AG (SIE GY) and Vertiv Holdings (NYSE: VRT), which trade, on average at ~21x 2026E EV/EBITDA, while the Aerospace systems segment could be compared with Honeywell Aerospace, Parker-Hannifin (NYSE: PH), which acquired Meggitt plc (formerly MGGT LN) in 2022 for ~16.3x adj. EBITDA (or ~10.9x, including synergies), Safran (SAF FP) and Woodward (NASDAQ: WWD), which trade, on average at ~20x 2026E EV/EBITDA.  The Vehicle segment competes with Allison Transmission (NYSE: ALSN), Cummins (NYSE: CMI) , Dana Inc. (NYSE: DAN), and Visteon (NASDAQ: VC), which trade, on average at ~8.5x 2026E EV/EBITDA, while the Mobility segment could broadly be compared with Continental AG (CON GY), Denso Corp. (6902 JT), TE Connectivity (NYSE: TEL) and Sensata Technologies (NYSE: ST), which trade, again, on average, at ~9.0x 2026E EV/EBITDA.  Applying a blended multiple of ~19.5x (reflecting segment valuations roughly in-line with segment peers) yields an enterprise value of ~$151 billion while accounting for projected net debt implies a preliminary sum-of-of-parts (SOTP) valuation of ~$142 billion or ~$363 per share (based on a diluted share count of ~390 million).

Q Shares Rally on Strong Results & Outlook From TSMC, a ~7% Customer; Maintain BUY with a FVE of $105 per share (up from $104 per share)

Today, Taiwan Semiconductor (2330 TT, NYSE: TSM), who is a ~7% customer of Q’s (second only to Samsung Electronics at ~11.5%; see Exhibit 1 on page 2), reported better than expected 4Q 2025 results, demonstrating ~20.5% year over year top-line growth (and ~5.7% sequentially) in the December-ending quarter.  (For the full-year TSMC sales were up ~36% year over year to $122.4 billion.)

As importantly, management signaled confidence in the durability of demand for its “leading edge” process technologies; to that end, the company projected sales would be up ~30% in U.S. dollar terms during 2026E and that the company expects it 5-year compound annual top-line growth rate (CAGR) to be ~25%

In terms of capital spending the company expects to deploy $52-$56 billion in 2026 (up from $40.9 billion in 2025 and $29.8 billion in 2024 and $167 billion over the last five years), which will be primarily (i.e., 70%-80%) allocated toward advanced process technologies with the remainder dedicated to specialty technologies (i.e., ~10%) and advanced packaging (i.e., 10%-20%).  Further, amid confidence in the underlying longer-term supply/demand dynamics of their industry, TSMC management indicated that its capital spending plans over the next three years are likely to be “significantly” higher than the previous three (and may, at least anecdotally, reach ~$200 billion in 2028-2030).

Recall, Qnity Electronics (NYSE: Q) was spun-off from DuPont de Nemours (NYSE: DD) on November 1, 2025 and began trading on November 3^rd; broadly, Qnity (Q), the pre-spin Electronics business represented 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 versus the former parent.

Broadly, the standalone business, which estimates its total addressable market as greater than $30 billion (growing at ~4%-5%), spans the so-called value chain of the semiconductor industry with solutions/materials for chip fabrication, advanced packaging, and printed circuit board (PCB) production (e.g., conductive metals, lithographic films, and flexible laminates).  It also includes assembly & display (e.g., electromagnetic or EMI shielding & thermal or heat management), where its investments in & reputation for innovation (e.g., R&D at ~7% of sales) along with the its breadth of services and long-standing customer relationships/collaborations (i.e., more than 35-years for many of its top-customers) position it to take advantage of what management views as two technology “megatrends.”  These are high-performance computing, fueled by AI & machine learning, cloud computing and the seemingly exponential proliferation of data (e.g., Moore’s Law & 3D stacking), as well as advanced connectivity, driven by the increasing demand for more connected/responsive devices, edge computing and autonomous driving systems (where heterogenous integration and miniaturization are key drivers).  In terms of end markets Q will be levered to growth in data centers/next-generation computing/AI, smartphones and the broader consumer electronics space, as well as the communications infrastructure, automotive (i.e., EV and autonomous) and industrial sectors.  By geography, Q generates nearly ~80% of sales in the Asia Pacific region, of which ~30% is in China, with the remainder stemming from the Europe, Middle East & African (EMEA), North American and Latin American regions (see Exhibit 1).

In terms of guidance, on a post-spin pro forma basis, Qnity projects consolidated full-year 2025E sales of ~$4.6 billion, implying ~7% year-over-year growth, with ~11% growth in adjusted EBITDA to ~$1.4 billion driven by ~100 basis points of margin expansion, to ~30%.  By segment, management expects Semiconductor Technology sales of ~$2.6 billion and adj. EBITDA of more than $900 million (or a ~36% margin), while Interconnect Solutions sales are projected to be ~$2.0 billion with adj. EBITDA of greater than $500 million (or a margin of ~26%).  Adjusted free cash flow is estimated to be ~$600 million, based on a capital spending budget of ~$250 million, and its net leverage ratio (at year-end) is contemplated at ~2.5x (see Exhibit 2 on page 3).

In terms of the medium-term financial outlook (i.e., 2025E-2028E; see Exhibit 2 on page 2), Qnity targets compound annual organic growth of ~6%-7%, or roughly 200 basis points above the underlying market,  driven by share/content gains, a higher-value mix shift toward areas such as semiconductor fabrication (or “semi fab”) consumables, advanced packaging & interconnects as well as thermal management, along with an adjusted EBITDA CAGR of ~7%-9% (see Exhibit 3 on page 3).

Our fair value estimate for post-spin Qnity Electronics (Q) is modestly revised to $105 per share (previously $104 per share) based on a ~16x blended multiple off on 2026E EBITDA while accounting for corporate costs and projected net debt (see Exhibit 4 on page 4).

Please see The Spin-Off Report dated October 8, 2025 and Updates from 10/16/2025,11/3/2025 and 11/6/2025 for more information.

Comcast (CMCSA) Completes the Spin-Off of Versant (VSNT); Based on Initial Trading Indications we Maintain our NEUTRAL Ratings on both Post-Spin Entities

Distribution: On January 2, 2026, at 11:59 p.m. (ET), Comcast Corporation (NASDAQ: CMCSA) completed the tax-free spin-off of 100% of Versant Media Group, Inc. (NASDAQ: VSNT).  Shareholders of record received one share (either Class A or B) of VSNT for every twenty-five shares owned of Comcast (CMCSA). 

Regular-way Trading & Indexation: Shares of VSNT (as well as post-spin CMCSA) commence so-called “regular way” trading this morning (January 5^th). Comcast will remain a member of the S&P 500 index while Versant will replace Brandywine Realty Trust in the S&P Small Cap 600 index, as of the market open on January 6, 2026.

When-issued Trading: For perspective, in the so-called “when-issued” trading market shares of Versant (VSNTV) opened on 12/15, the first day of trading, at ~$55 per share (versus our initial $49 per share fair value estimate) before closing at $45.65 per share on relatively anemic volume of 4.65K shares. On 12/16, VSNTV shares closed at $27.45 per share on trading volume of nearly ~106K shares. In subsequent days, shares traded rather stagnantly around ~$47 per share on relatively anemic volume (of ~21.5K shares per day, on average) before closing on Friday January 2, 2026, at $46.65 per share (on a daily trading volume of 187.5K shares). 

Pre- & Post-spin Recommendations: Following our initial pre-spin NEUTRAL recommendation, shares of consolidated/pre-spin CMCSA appreciated ~6.1% (outperforming the S&P 500 and Russell 2000 by ~6.4% and ~7.1%, respectively).  In terms of our post-spin recommendation, amid an evolving/turbulent outlook for the telecom/media space broadly along with an admittedly “muddled” growth outlook at the parent and objectively challenging underlying fundamentals at the SpinCo specifically we remain cautious on both sides of this transaction, at least initially.  That said, given the obvious size disparity between SpinCo and its soon-to-be former parent, which will remain a member of the S&P 500 index while Versant will be moved to the S&P Small Cap 600 index, it seems logical to suggest there will be a 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 (and at least anecdotally, investor’s) perspective, the impending transaction is aimed at separating what could be deemed “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 and are in secular decline.  This dynamic may potentially present the conditions for potential price dislocations that we will assuredly monitor in pursuit of an attractive entry point/trading opportunity, particularly relative to the standalone’s solid margin profile of better than ~30% and its robust cash flow generation (i.e., $1.0-$1.375 billion annually in 2025E-2026E), which 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, at the current valuation 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.  For context on that front, 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 2024.  For 2025, full-year 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.  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.    

Post-spin, CMCSA (i.e., the parent) intends 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, which, which currently comprise ~60% of sales (up from ~50% several years ago) and are targeted to make up ~70% of sales over the “next couple of years,” being set against “more mature businesses that are obviously being managed for cash flow” resulting in an admittedly “muddled” growth profile in the near-to-medium term, which is a dynamic that could, again, in the absence of any transformative M&A activity, present a more attractive entry point at some point (either in initial trading or over the next several months). 

On pre-spin sum of the parts basis, we fairly valued 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) with post-spin CMCSA remaining at $28 per share.  Considering initial trading indications we maintain our NEUTRAL ratings on both spin-entities but, as always, we will continue to monitor shares for potentially more attractive entry/trading points. 

Also, please see The Spin-Off Report dated December 12, 2025, for more information.

ULVR Completes the Separation of MICC; Maintain Post-Spin NEUTRAL Rating on ULVR with a BUY Rating on MICC

On December 6, 2025, Unilever PLC (ULVR LN) completed the tax-free separation of its global Ice Cream division, The Magnum Ice Cream Company (TMICC). Shares of TMICC began trading on the Euronext Amsterdam, with secondary listings on exchanges in both London and New York, on December 8, 2025. Unilever shareholders received one share of TMICC for every five Unilever shares held, as per the agreed upon distribution ratio.

Objectively, TMICC is trading below the technical reference price of €12.80 set on December 5^th and at a material discount to both consensus and our internal fair value estimate. In our view, the initial reset in share price reflects a number of near-term pressures/concerns, including the well-documented governance controversy at Ben & Jerry’s, passive investor rebalancing, and a broader market preference to see evidence of management’s ability to deliver on its margin expansion goals before assigning a higher multiple, particularly given the perceived trend toward healthier lifestyles (e.g., MAHA). On the first point, a recent Unilever-backed audit identified deficiencies in financial controls and governance at the Ben & Jerry’s Foundation, prompting Magnum to withhold funding and calls for board chair Anuradha Mittal’s resignation, which she has resisted amid claims that such a move would undermine the Board’s autonomy. For context, Ben & Jerry’s accounts for annual revenue of €1.1 billion (14% of Magnum’s global turnover) and the governance issues/internal acrimony have seemingly introduced an additional layer of uncertainty (although we still view the odds of a divestiture as low).

Reflecting updated prospectus disclosures, operational challenges, and the multi-year path to achieving Froneri-like margins, we apply a 20% discount to the Froneri transaction multiple of 12.6x, yielding a 10.1x EV/EBITDA target multiple for TMICC. Applying this to TMICC’s 2025E EBITDA of €1.3 billion implies an enterprise value of €13.2 billion.

Post-spin and share consolidation, Unilever is trading broadly in line with our £50.51 per-share revised fair value estimate (£48.43 at LSE), consistent with our earlier view that a structurally higher-margin, asset-light, premiumization-driven portfolio would prove more resilient at listing.

Importantly, post-spin trading dynamics have been broadly in line with our pre-spin expectations. To that end, we had advised existing Unilever shareholders to maintain positions, given the value-unlock catalyst and optionality from TMICC’s listing. We also noted that incremental investors were better served waiting for a more attractive post-spin entry point in TMICC, where early dislocations seemed likely. Current pricing confirms that stance. That said, in our view, TMICC now presents an attractive entry point for investors with medium to long-term view.

Please see the European Spin-Off Report dated October 22, 2025 for more information

Upgrade SOLS to BUY (from NEUTRAL) with Shares Seemingly Attractively Priced Following Post-Spin Sell Off

Solstice Advanced Materials Inc, (NASDAQ: SOLS), completed its tax-free separation from Honeywell International Inc. (NYSE: HON) on October 29 2025; since that time, amid some degree of technical factors given the size disparity, which precipitated SOLS’s transition from the Dow Jones Industrial Average (DJIA) to the S&P 500, as well as, perhaps more importantly, the lack of, in our view, a natural shareholder constituency within the larger parent (i.e., Aerospace & Automation) shares have declined ~13.5% (underperforming the S&P and Russell indexes by ~10% and 8%, respectively).

In that context, with shares currently trading at ~7.0x 2026E EV/EBITDA, a multiple roughly in-line with low-margin peer Chemours (NYSE: CC) but a steep discount to what we view as its more relevant comparisons, namely Entegris (NASDAQ: ETNG) and Element Solutions (NYSE: ESI), which trade at ~16x and 12x, respectively, we think shares are attractively priced for a high-quality materials company with solid end-market exposures and relatively low leverage.

Recall, management re-iterated its 2025 guidance on its most recent conference call earlier this month (see Exhibit 1) and its “Medium-Term” targets continue to call for low-to-mid single digit top-line growth, a mid-single digit adjusted EBITDA CAGR, free cash flow conversion of greater than 70% (see Exhibit 2).  Capital expenditures are projected to be in the mid-single digits, as a percentage of sales, and the net leverage target is ~1.5x (roughly in line with current levels).

Our fair value estimate remains $59.50 per share, reflecting a blended multiple of 10.9x on 2026E EV/EBITDA as well as projected net debt of ~$1.6 billion and a diluted share count of ~160 million (see Exhibit 3 and Exhibit 4 on pages 2 and 3).

Please see the Spin-Off Report dated October 14, 2025, and the Updates from October 16, 2025 and October 30, 2025, for more information.

MODG agrees to sell a 60% majority stake in its Topgolf business to private-equity firm Leonard Green in a transaction expected to net ~$770 million in proceeds and close in 1Q 2026; withdraw recommendation/close coverage, as of today’s market close

This morning, before the market open, MODG announced a definitive agreement to sell a 60% majority stake in its Topgolf entertainment venue business, including the Toptracer technology platform, to private equity firm Leonard Green & Partners (LPG). The transaction, which was unanimously approved by MODG’s Board, values the business at ~$1.1 billion and is expected to result in net cash proceeds of ~$770 million for RemainCo.

The deal, which we note was speculated about in the Wall St. Journal late last week, is expected to close in 1Q 2026, subject to customary conditions (of which financing is not one as LPG has secured all the required capital commitments).

Notably, upon closing, the company will change its corporate moniker to Callaway Golf Company as well as its trading ticker symbol to CALY (while remaining listed on the New York Stock Exchange or NYSE).

Recall, MODG had been pursuing a dual track (spin/sale) process for TopGolf, which was announced in September 2024; in that context, it is our perception that the spin-off option was likely the least favored by investors while a full sale was likely viewed as the best outcome. For its part, management thinks its decision to maintain an equity stake leaves room for incremental upside given LPG’s deep experience with unlocking value at high-growth consumer brands.

In our view, investors will likely be keenly awaiting specific capital deployment plans for the ~$770 million in expected net proceeds, which, without management having provided any tangible specifics on this morning’s conference call, broadly encompass debt reduction as well as returns to shareholders via dividends (or maybe a potential special dividend).

For context, the company ended 3Q 2025 with net debt of $2.226 billion (versus $2.54 billion in the prior period), implying a leverage ratio of 3.8x (versus 4.6x in 3Q 2024) and a REIT adjusted leverage ratio of 1.4x (compared with 2.4x). Anecdotally, management indicates that while MODG will retain the term loan all venue-related liabilities will be assigned to Topgolf, leaving post-sale RemainCo with “minimal” net debt (and substantial flexibility).

Given today’s announcement and the proximity of shares to our fair value estimate, we will withdraw our recommendation/close coverage of MODG, as of today’s market close.

For context, shares returned ~35.5% since our initial recommendation in January 2025 (outperforming the S&P 500 and Russell 2000 by 26% and 34%, respectively).

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MODG to Sell a 60% Majority Stake in Topgolf to Leonard Green & Co. in a Transaction that is Expected to Net ~$770 million in Proceeds and Close in 1Q 2026; Drop Coverage, Effective Immediately  

This morning, before the market open, MODG announced a definitive agreement to sell a 60% majority stake in its Topgolf entertainment venue business, including its Toptracer technology platform, to private equity firm Leonard Green & Company. 

The transaction, which was unanimously approved by MODG’s Board, values the business at ~$1.1 billion and is expected to result in net cash proceeds of ~$770 million to the company. 

Upon closing, which is expected to occur in 1Q 2026, the company will change its corporate moniker to Callaway Golf Company as well as its trading ticker symbol to CALY (while remaining listed on the New York Stock Exchange or NYSE).

Recall, MODG announced a tax-free spin-off for the Topgolf business in September 2024 but has subsequently been pursuing a dual track (i.e., spin/sale) process.

Given today’s announcement, which obviously comes in lieu of the aforementioned potential spin-off transaction, The Spin-Off Report will drop coverage of Topgolf Callaway Brands Corp. (NYSE: MODG), effective immediately.

(Please see The Spin-Off Alert dated 9/4/2024 or visit hiddenopportunites.report to review our Hidden Opportunities coverage of the name.)