#vrtv

(https://www.youtube.com/watch?v=WPrUNyZtrFM에서)

(https://www.youtube.com/watch?v=iIQqoeztfnQ에서)

(https://www.youtube.com/watch?v=rWoAQ8nRedc에서)

By Alex Gavrish, Etalon Investment Research | Author of "Wall Street: Back To Basics"

Spin-off from International Paper and merger with Unisource 

On July 1, 2014, International Paper completed the previously announced spin-off of xpedx to the International Paper shareholders, forming a new public company called Veritiv. Immediately following the spin-off, UWWH (parent company of Unisource) merged with and into Veritiv. Immediately following the completion of these transactions, International Paper shareholders owned approximately 51%, and the UWWH owned approximately 49%, of the shares of Veritiv common stock on a fully-diluted basis. Veritiv's common stock began regular-way trading on the New York Stock Exchange on July 2, 2014 under the ticker symbol VRTV. Spin-off company profile Veritiv Corporation is a leading North American business-to-business distributor of print, publishing, packaging, facility and logistics solutions. Veritiv was established in 2014, following the merger of International Paper's xpedx distribution solutions business and UWW Holdings, Inc., the parent company of Unisource. Veritiv operates from more than 180 distribution centers primarily throughout the U.S., Canada and Mexico, serving customers across a broad range of industries. These customers include printers, publishers, commercial printing, data centers, manufacturers, higher education institutions, healthcare facilities, sporting and performance arenas, retail stores, government agencies, property managers and building service contractors. Seth Klarman of Baupost Group acquires a stake On August 8th, 2014, Baupost Group disclosed that as of July 31, 2014, it owned 2.25 million shares of Veritiv, or 14.06% of total shares outstanding. The stake was apparently acquired during the period since the trading in company's shares started on July 1st, 2014 till July 31st, 2014. Approximate cost could be estimated by calculating a volume-weighted daily average price for company's stock during this period, which equals $36.79. As of January 31st, 2014, Baupost Group owned 2.31 million shares, or 14.46% of total shares outstanding. Veritiv Corp's shares declined recently by about 19% to $43.56 from their January 2nd, 2015, high of $54.11 and we believe that current price provides a convenient entry point for a long-term, value investor. Valuation Based on a recent share price, Veritiv had market capitalization of $697 million, net debt of $1,027 million and enterprise value of $1,724 million. In the 2014 fiscal year company generated $154 million in EBITDA (adjusted, pro-forma) while in the fourth quarter of 2014 EBITDA was $40 million ($161 million on an annualized basis). This values the company at an EV/EBITDA multiples of x11.2 and x10.7, respectively. Company estimated that in 2015 EBITDA will reach $170 million (mid-point of the range) and overall, Veritiv plans to grow EBITDA by $100 million by 2017. Applying an EV/EBITDA multiple of x8, Adjusted EBITDA of $254 million and an average annual free cash flow of $150 million, at the end of the fiscal 2017, or three years from now, company can be valued at $91 per share. This provides a potential upside of 109% from current share price. In addition, Veritiv's working capital reflects the need to carry significant amounts of inventory in distribution centers and a significant accounts receivable balance. If company will be able to optimize its working capital and decrease the amount of capital that is locked-up currently in inventory and accounts receivable balances, the upside to share price could be even higher. Spin-off insights

In my recently published book Wall Street Back To Basics, I discuss decision framework for investing in spin-off companies. Separation of Veritiv Corp seems to offer some benefits that usually characterize spin-offs. In addition, due to merger transaction that was implemented immediately after the spin-off, the misunderstanding and under-appreciation of company's potential by the market is even higher. Reasonable valuation, significant opportunities for growth, synergies, and cost savings due to a large size of the the combined business, and presence of a famous value investor with a significant stake in the company make Veritiv an attractive investment target for a long-term, value investor.

Event-Driven And Value Investment Digest