B/E surprised investors May 4 when it abruptly canceled a scheduled investor day and said it had hired Citigroup (C) and Shearman & Sterling to help it explore options, a move many investors believe was prompted by Relational Investors taking a 3.5% stake in the firm. The company last week said that it would postpone its annual meeting, planned for July 24, until the process was complete.
It remains to be seen whether the split will be enough to satisfy Relational, which according to sources had intended to nominate co-founder David Batchelder and managing director Matthew Hepler to B/E's board. Hepler last month described B/E as having "great core assets" and a strong position, but Relational was believed to favor a divestment of the distribution arm.
The company said Tuesday it expects to make an announcement on a new annual meeting date within the next 60 days. B/E also added to its board on Tuesday, naming one-time Honeywell International (HON) chief financial officer David J. Anderson as a director.
Though B/E's assets are well regarded, sources cautioned from the beginning that a sale was unlikely due to tax implications, as well as B/E's already sky-high valuation and a potential lack of interest by large potential buyers including United Technologies (UTX) and Honeywell.The distribution business, which B/E cobbled together using M&A in recent years, could be of interest to a private equity firm either prior to the split or once it trades as a standalone. Shares of B/E opened down 4%, to $95 apiece, on Tuesday as investors digested the news and its implications for a potential sale of the company. But analysts say there is still upside in a split. Sterne Agee analyst Peter Arment in a note said that in a breakup B/E's distribution business could be worth between $35 and $43 per share while the aircraft interiors business could be worth between $105 and $131 apiece.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV