Attached, please find a Hidden Opportunities update on Jack in the Box Inc. (NASDAQ: JACK).

JACK sells Qdoba to Apollo for $305 million in cash

• Today, JACK announced a deal to sell its Qdoba Mexican Eats restaurant concept to the private equity-firm Apollo for ~$305 million.
• The transaction is expected to close by the end of April 2018 and the company will deploy proceeds, as required by the terms of its credit facility, toward debt reduction.
• Based on estimated adjusted F2017 EBITDA, including corporate costs, of $45 million for standalone Qdoba the purchase price implies a ~6.8x multiple.
• In our view, the sale price is somewhat low versus publically traded fast casual peers and recent deal multiples, which average ~9.5x and 10x, respectively.  In fact, it is our initial base-line assumption that the purchase price will result in a negligible, if any, gain given the level of investment in the years subsequent to JACK’s $45.5 million purchase of Qdoba in 2003.
• That said, the purchase price is roughly in-line with recent media speculation and we think the larger driver of value creation related to this transaction is the potential for multiple expansion as well as a more aggressive capital allocation strategy at standalone Jack in the Box, which was 88% franchised at the end of F2017 and expects to be 90%-95% franchised by the end of F2018.
• Highly franchised quick service peers trade, on average, at more than 15x 2018E EV/EBITDA and support leverage profiles in the 4x-6x (compared with 12x and ~3.5x, respectively, at JACK). 
• Assuming standalone JACK trades at a 14x multiple, which is a still discount to the peer average but in-line with Wendy’s (NASDAQ: WEN) and that the Qdoba proceeds are redeployed toward net debt reductions, a fair value of $111 per share could be calculated (with incremental upside potentially stemming from a more aggressive capital allocation strategy in the future). 
• The company indicated it would provide more details on the sale as well as F2018 financial guidance at a conference appearance on January 9, 2018, at which time we will update these preliminary forecasts.

On December 14, 2017, DDR Corp. (NYSE: DDR) announced its intention to spin off a portfolio of 50 assets, comprised of 38 Continental U.S. assets and the entirety of the Puerto Rico portfolio (12 assets) into a separate publicly-traded REIT to be named Retail Value Trust (“RVT”). Shareholders of DDR will receive shares of RVT via a taxable pro rata stock distribution. New DDR’s dividend will be adjusted to reflect the smaller size of the Company. Assuming New DDR’s implied cap rate declines to 8.0%, while RVT’s cap rate remains at the current 8.7%, pre-spin shares of DDR would be fairly valued at $9.35 per share (assuming 368.5 million shares outstanding), implying approximately 8% upside from the current share price ($8.67 as of this writing). Given the sensitivity to applied cap rate, asset sales at RVT at better than 8% cap rate would drive meaningful upside to the shares valuation.

On December 14, 2017, Twenty First Century Fox Inc. (NYSE: FOXA, FOX) announced its intention to separate select properties into a separate, publicly-traded entity (New Fox). The spin entity will include branded properties Fox News Channel, Fox Business Network, Fox Broadcasting Company, Fox Sports, Fox Television Stations Group, and sports cable networks FS1, FS2, Fox Deportes and Big Ten Network (BTN). The transaction will also include the Company’s studio lot in Los Angeles and equity investment in streaming media company Roku. In addition to the spin-off, 21st Century Fox today also announced that the Company has entered into a definitive agreement to combine the rest of its businesses with The Walt Disney Co. (NYSE: DIS). Fox shareholders will receive 0.2745 DIS shares for each Fox share in the merger (regardless of Fox share class).

Following the transactions it could be expected that New Fox’s multiple contracts to closer resemble peers. Valuing shares at 10.0x EBITDA, New Fox would be assigned a fair value estimate of $12 per share. If DIS maintains the current premium multiple shares are awarded, the post merger entity would be fairly valued at $119 per share. Accounting for the approximate 25% ownership stake in merged DIS, pre-spin shares of FOXA can be fairly valued at $44 per share, consisting of $11.82 per share in New Fox and $32.58 per share in value from the merged DIS ownership). Given the significant upside to the fair value estimate, shares of FOXA are recommended for purchase prior to the spin and merger transactions.

On December 12, 2017, Trinity Industries Inc. (NYSE: TRN) announced its intention to separate its infrastructure-related business into an independent publicly-traded company via a tax-free spin-off. The transaction is expected to be completed in the second half of 2018 and is subject to finalization of the entity structure of the spun-off business, finalization of the capital structure of the two companies, the effectiveness of appropriate SEC filings, and final approval from the Company’s Board of Directors. On a preliminary sum-of-the-parts basis, shares of TRN are estimated to have a fair value of $39 per share, representing approximately 8% implied upside from the current share price ($36.60 per share as of this writing). Note that TRN shares have appreciated 25% year-to-date, outpacing the 11% increase in the S&P 400 mid-cap Index (MID), and currently trade at 10.3x consensus EBITDA.

On December 12, 2017, Autoliv Inc. (NYSE: ALV) announced its intention to separate its Electronics business into an independent publicly-traded company via a tax-free spin-off. The transaction, which is expected to be tax-free to stockholders both in the US and Sweden, is anticipated to be completed during the third quarter of 2018. On a preliminary sum-of-the-parts basis, shares of ALV can be fairly valued at $132 per share.

On December 7, 2017, Dover Corporation (NYSE: DOV) announced its intention to separate its upstream energy businesses, called the “Wellsite” business, into an independent publicly-traded company via a tax-free spin-off. The transaction is expected to be completed no later than the second quarter of 2018. In conjunction with the spin-off announcement, Dover announced both an expansion of its ongoing rightsizing initiatives–which are now estimated to deliver $50 million in savings in 2018—as well as share repurchases totaling $1 billion in 2018 (includes use of cash from a dividend to be paid by Wellsite, estimated at $700-$800 million). On a preliminary sum-of-the-parts basis, shares of DOV can be fairly valued at $111 per share.

Follow the link above for the full Spin-Off FLASH Report.

Attached, please find a Hidden Opportunities update on The Madison Square Garden Company (NYSE: MSG).

Fair value increased to $282 per share (from $275), reflecting Forbes’ updated valuation of the New York Rangers; view potential sale of the New York Liberty as offering minor upside optionality

• In its annual valuation list of NHL Hockey teams Forbes magazine increased the estimated value of the New York Rangers franchise to $1.5 billion (from $1.25 billion), representing a 20% year over year boost.
• Value is assigned across four key areas, including the franchise’s value attributable to revenue sharing agreements, city/market size, the franchise’s arena and its brand.  Excluding the value of the Rangers’ arena, Madison Square Garden, whose value is captured in our assessment of the company’s owned-real estate, the team’s value increased about 21% year over year to $1.035 billion (from $856 million).
• Based on this adjustment (along with minor updates to MSG’s net cash balance and diluted share count as well as the estimated value its investments in unconsolidated affiliates) our sum of the parts fair value estimate is increased to $282 per share (from $275; see Exhibit #1 on page 2).
• As previously announced, MSG is seeking a buyer for its WNBA franchise, the New York Liberty.  While we continue to place no value on the Liberty in our base case valuation scenario we would note that in 2007 the Houston Comets were purchased for $10 million; as such, the potential monetization could be viewed as offering incremental (albeit modest) upside.

For context, shares of MSG have declined about 4% since our initial publication in late-October 2017 (versus a 2% increase in the S&P 500 and a 1% increase in the Russell 2000).  That said, with more than 30% upside to our current base case valuation (and minimal implied downside to the bear case) we continue to view shares as an attractive investment.

BC intends to divest its Sea Ray boat brand, which will reduce cyclicality as well as improve margins and ROIC at the Boat Group; management reaffirms 2017, 2018 and 2020 guidance

• Brunswick disclosed it has retained Lazard (NYSE: LAZ) and commenced a process to sell its Sea Ray boat brand.
• Sea Ray, which is one of the 15 brands included in the company’s Boat Group, was projected to generate ~$380 million of sales as well as a pre-tax loss in 2017.  The company expects to recognize an un-quantified charge on the anticipated loss associated with the sale.
• In terms of the financial outlook, BC maintained its 2017 and 2018 EPS guidance ranges of $3.85-$3.87 and $4.20-$4.40, respectively. As well, the company affirmed its recently articulated 2020 EPS target of $5.25-$5.75 although it now expects the Boat Group’s operating margin to be 7%-8% (versus the previous expectation of 6%-8% and the 4.5% posted in 2016).
• Management suggested that assuming tax reform is enacted proceeds from the sale could be deployed toward the acceleration of pension contributions, which would increase the company’s free cash flow generation in 2019-2020.
• The transaction is expected to be completed in 1H 2018 and, as of 4Q 2017, the business will be reported as a discontinued operation.  The company expects to provide pro forma disclosures prior to reporting full-year results in early 2018.
• Anecdotally, management indicated the deal reflects the Marine segment’s focus on outboard boats and engines (versus inboard) as well as on its high-margin parts & accessories businesses.  BC expressed commitment to the remainder of its Boat business, which will now have a more profitable/less cyclical mix.

Our fair value estimate of $69 reflects a blended multiple of 8.0x of 2019E EBITDA of ~$740 million as well as projected net cash of $116 million.

Above, please find a Hidden Opportunities update on Marcus Corp. (NYSE: MCS).

Fair value increased to $33 (from $31); CINE deal for RGC values the company at ~9x 2018E EV/EBITDA and we view additional consolidation as likely

• Today, London-based Cineworld (CINE LON) announced an agreement to acquire Regal Entertainment (NYSE: RGC), the second largest domestic theatre chain behind AMC Entertainment (NYSE: AMC), for $23 per share or almost $5.9 billion.
• By our calculation, the deal represents a ~8.95x 2018E purchase multiple, not including $150 million of anticipated synergies, which compares with the 8.0x multiple previously applied to MCS’s Theatres business and the average sector M&A multiple over the last several years of about 9.0x (in a range of 6.5x- 12x).
• With pro-forma post-deal leverage of more than 4x, CINE along with AMC, which is levered at more than 5.5x, are likely on the M&A sidelines, at least in the near-term, but we think further industry consolidation is likely and note that domestic-player Cinemark (NYSE: CNK) is levered at just over 2.0x while foreign-players Kinepolis (KIN BB) and Cineplex (CGX CN) are at 1.8x and 2.4x, respectively.
• In any event, we expect Marcus will continue to pursue the tax-efficient monetization of its owned Hotel assets as it takes a more asset-light approach to its lodging business, which we think will unlock incremental value and, at some point, leave MCS comprised of an asset-rich Theatre business and an asset-light Hotel business.
• Our fair value estimate is increased to $33 per share (previously $31) based on 8.5x (up from 8.0x) and 12.0x (unchanged) 2018E EBITDA multiples of MCS’s Theatres and Hotel & Resorts businesses, respectively, as well as projected net debt of $387 million.
• For context, shares of MCS shares have returned ~17% since our initial recommendation in August 2017 (versus a 7% increase in the S&P 500 and a 9% increase in the Russell 2000) with incremental upside to our base case valuation of 13.5%.

Above, please find a Hidden Opportunities update on Meredith Corp. (NYSE: MDP).

Fair value increased to $75 per share (from $61) as TIME deal adds accretive scale to Publishing; see additional near-term acquisition opportunities in Broadcasting and ultimately a separation

• Today, MDP announced an agreement to acquire Time Inc. (NYSE: TIME) for $18.50 per share or ~$2.8 billion.  By our calculation, the deal represents a ~6.5x 2018E purchase multiple, not including the $400-$500 million of synergies MDP expects to achieve over the first two years.
• The deal is expected to close in the first quarter of calendar 2018 and MDP has secured $3.55 billion of debt financing, including an undrawn $350 million revolver, as well as a $650 million preferred equity investment from Koch Equity Development (who will receive neither operational/editorial input nor Board representation). MDP estimates an initial pro-forma leverage ratio (incl. synergies) of 2.9x, which it is committed to reducing toward ~2.0x by calendar 2020.
• We view the deal as adding accretive scale to MDP’s Publishing business, particularly in regards to digital advertising, and think it positions the company to ultimately separate its Broadcasting business, which generates steady growth and EBITDA margins in the 35%-40% range. On its conference call, management indicated that it is actively working on several potential deals to acquire incremental Broadcasting assets and that although financial covenants related to the TIME deal would likely preclude the businesses’ near-term separation the option would remain an opportunity as the company de-levers.
• Our initial take on the transaction increases our  sum of the parts fair value estimate to $75 per share (from $61) based on a blended multiple of ~7.5x applied to combined F2019 EBITDA of ~$950 million, which assumes $200 million of realized synergies in Year-1, as well as projected net debt of $3.6 billion.
• For context, shares of MDP have returned ~65% since our initial recommendation in September 2015 (versus a 38% increase in the S&P 500 and a 40% increase in the Russell 2000).