JANA Partners and Civeo
Earlier in June, Barry Rosenstein’s JANA Partners disclosed an 11.5% stake in Civeo Corp. (CVEO) via a 13D filing with the U.S. Securities and Exchange Commission (or SEC). The filing said that the fund acquired around 12,241,760 common shares of Civeo. The filing added that the shares were acquired during a spin-off of Civeo from Oil States International (OIS) that took place at the beginning of June. A recent 13D amendment to the SEC said JANA reduced its holding in OIS to 2.6 million shares or 4.9% stake. JANA had held 6.12 million shares in OIS according to its 13F filing for 1Q14.
Civeo, which was the accommodations business of OIS, provides remote site accommodations, logistics, and facility management services to the global natural resource industry, with operations primarily focused in Canada, Australia, and the United States. Civeo owns a total of 17 lodges and villages operating in Canada and Australia, with an aggregate of more than 21,000 rooms. Additionally, it also has 11 smaller open camp properties as well as a fleet of mobile accommodation assets in the United States and Canada. Civeo’s customers include major and independent oil and natural gas companies, mining companies, and oilfield and mining service companies.
JANA was instrumental in driving the spin-off of OIS’s accommodations business by taking an activist position in the company in April last year. OIS manufactures products for deepwater production facilities and sub-sea pipelines. OIS also provides completion services and land drilling services to the oil and gas industry. It previously operated in four segments: accommodations, offshore products, well site services, and tubular services. Activist investor David Einhorn of Greenlight Capital said in a presentation at the Ira Sohn conference in May last year that OIS could be worth $155 per share if it spins off its accommodation business. OIS is one of Greenlight’s top five holdings as per the fund’s latest 13F. Following activist pressure, OIS agreed last year to spin-off its accommodation business in 2014. OIS also sold off its Tubular services business for $600 million to Marubeni-Itochu Tubulars America.
According to a release on the spin-off, each OIS shareholder received two shares of Civeo for each share of OIS common stock held by the shareholder on the record date. Civeo is also expected to make a cash distribution of $750 million to OIS in connection with the spin-off. Civeo will fund this with cash proceeds from borrowings under its expected $775 million term loan.
Spin-offs have gained popularity as a method to unlock shareholder value especially among activist investors. Earlier this year, Casablanca Capital pushed Cliffs Natural Resources (or CLF) to spin-off the company’s international assets. Pinnacle Entertainment (PNK) has seen activist investor Orange Capital LLC urge the casino operator to spin-off its properties into a real estate investment trust (or REIT). Investors can gain exposure to spin-offs by investing in the Guggenheim Spin-Off ETF (CSD) that tracks companies that have been spun-off within the past 30 months. The ETF has returned 379% since March, 2009, market bottom as compared to the SPDR S&P 500 (SPY), which returned 213% over the same period.