I never thought the interiors business was up for sale.
I don't think any of the firms the author mentions at the top of his story were offered the Interiors
unit alone. Relational et al, would not have allowed that deal.
I feel that Koury has invested extra time & resources in developing his "services" unit and I feel
it has dampened the performance of the interiors business & maybe it growth prospects.
Interiors margins of 20.4 %
Services margins of 22.8 %
A good forensic accountant (Relational, maybe) could find where a mgmt team was not optimizing
the core business in favor of the CEO's new prized growth business....."Services"
Maybe Relational's DD found re-directing of resources within BEAV, which risked the core cash
cow Interiors operating metrics, and by extension, 2/3 of BEAV.
I feel currently no one will want either Interiors or Services in their current situation, as a
commingled mix. But in the future with their own mgmts and their own assets and resources,
both units could be quite attractive, post split. As you have mentioned, Bell, both units are
richly valued, but add more and better performing mgmts and assets to both units and BOTH
parts of BEAV will shine. Not in 2014 maybe in 2017...?
Koury gets his chance to make Services a "real winner" as his last act. It will be interesting
to see if he can pull it off and get his big windfall as he retires. Only this time he will not
have the Interiors unit to bleed for his development costs........
I wish the author would have spent more time discussing potential growth opportunities for
interiors (and Services) because that's the real story about today decision to split the firm.
$ 88 for BEAV, post split announcement, is a heck of a lot better investment then it was on
May 1st prior to all of the news/rumors........
Most multi-división corporations (conglomerates) are managed with some view to the life-cycle of the individual divisions and how the various operations can be optimized for the greater good. A company with a mature operation, needs growth opportunities. The growth opportunities are funded, in part, by the profits of the mature operation, the cash cow. This is standard operating procedure and a perfectly satisfactory approach by BEAV mgmt. The market loved it, as reflected in the stock price.
Along come a couple of hedge funds to rock the boat, just as the founder is planning his legacy and his exit. Introduce uncertainty, créate a little excitement where none was needed... The whole effort is probably motivated by tax planning to benefit Khoury´s retirement.