With Ford's F-series pickup sales up almost 20% year adding 2,000 new jobs to Ford's Kansas City operations will CODI's FOX Shock absorbers go along for the ride,too? You like to think that the success of FOX shocks on the Ford Raptor package would translate into more bucks for shareholders. Ford is the leader in pickups...and were CODI to dump furniture and medical it would provide resources that FOX might use to extend its' success at Ford onto GM,Chrysler,and Toyota. It's past time for a 5+% bump in our distribution, and Fox could help deliver it IMO.
Short term it should be a nice upside. Fox represents about 27% of CODI revenues and 33% of adjusted EBIDTA. They grew revenues 20% last year so should be valued at a fwd PE of 15-25x standalone. CODI market cap is about 850m with a fwd PE of about 9.5x. So typical of many spin outs, this piece will be worth more stand alone than as part of CODI which should be an upside to investors.
Long term they need to figure out how to replace the distributable income of FOX. CODI is always promoting the fact that they have never reduced their dividend. However, losing about 1/3 of their cash flow won't be easy to replace. Once this is spun off, the residual will quite likely take a pretty sizable hit until they find something new to invest in.
I'm guessing that CODI has two goals from this IPO: 1) Buy another company . 2) gain even more value from retained shares in FOX. Having an independent management team running FOX should expand the business even faster,bigger than CODI can do now. FOX has clearly outgrown CODI's mgmt size/structure and is ready to leave "The Compass Home". As "parents" the Compass Mgmt Group has done a superb job in creating shareholder value with FOX.