TriMas Tri-es To Unlock Value With Cequent Spinoff

Catching up on some news from the end of last year, TriMas Corporation (TRS) announced plans to spinoff its Cequent segments, which provide custom-engineered towing, trailer and cargo management products, into a standalone company. Post-spinoff, TriMas will be a more focused, diversified engineered products company. Love seeing the phrases ‘more focused’ and ‘diversified’ being used together like that, but it sort of makes sense. The rationale for the spin was pretty standard including providing each company with greater operational focus, more financial flexibility and different investor bases. TriMas has quite a long and complicated corporate history itself (before its most recent incarnation) so it’s no surprise that it’s looking at pursuing a move like this on its own.

The company released a detailed presentation about the spinoff along with the announcement and slide 7 provides a nice picture of the future two companies. Here is a financial snapshot taken from that slide:

1) New TriMas (current Packaging, Energy, Aerospace and Engineered Components segments)

• TTM Revenue: $855 million
• TTM Segment Operating Profit(1): $131 million
• Operating Margin(1) %: ~15%

2) Cequent (current Cequent Americas, Cequent APEA segments)

• TTM Revenue: $614 million
• TTM Segment Operating Profit(1): $48 million
• Operating Margin(1) %: ~8%

From a revenue perspective, TriMas is a bit larger, but it is the operating margins which really jump out with TriMas’ being nearly double those of Cequent. That is even with taking into account the poor performance from its energy group (<1% operating margin) due to ‘special items’ (severance and business restructuring costs). Looking at this, one can start to see how this spinoff came about. Taking just a tad deeper look, the future growth profiles are different as well. TriMas’ products are higher growth, while Cequent will need to continue its global push in order to grow. Take a look at the presentation as it provides a pretty good breakdown of the businesses.

Dave Wathen will remain CEO of TriMas and Cequent will be helmed by former EVP and CFO Mark Zeffiro. TriMas recently found itself a new CFO in Bob Zalupski, who will replace Mr. Zeffiro who is now solely focused on Cequent. The spinoff is expected to be tax free and completed sometime in the middle of this year (2015). We will keep you updated as additional information is released.

Disclosure: Author holds no position in any stock mentioned.