How sweet. It’s almost as if a few months earlier Ms. Hook wasn’t out touting the numerous benefits, including ‘greater clarity’, of a separation! The real reason for the spin though was pretty obvious as one unit appears to have a bright future and the other’s is pretty bleak. The Information Services unit grew at a 25% CAGR over the past four years as opposed to the 8% CAGR for the number portability business. Now 8% CAGR isn’t terrible, but the Numbering Services business lost a sizable contract with the US Government meaning a huge chunk of its revenue is likely to disappear beginning in 2018. While the company is suing the FCC to appeal that contract decision, it’s hard to see many people getting too excited about that spinoff.
On a separate note, it’s interesting to see Golden Gate Capital end another potential spinoff. Apparently they contacted NeuStar shortly after the spinoff announcement and it seems like this is a recurring strategy for the San Francisco based firm. Just last week, Golden Gate announced plans to acquire a part of Bob Evans Farms (BOBE) that had been the subject of spinoff rumors for quite some time. Additionally, the firm famously got involved in the drama at Darden (DRI) in 2014. The firm’s Red Lobster purchase ended that in-progress spinoff and likely led to the entire board’s ouster at the hands of activist Starboard Capital.
The 30 day go-shop period for NeuStar is now over and the deal is expected to close by the end of the third quarter this year. For now, this one is in the hands of the merger arb players.
Disclosure: Author holds no position in any stock mentioned.