This seemed to be the week of special meeting announcements and votes. I guess there’s no better time than when the market is on an upswing. While I did deploy the cash from rightsizing my Canadian Pacific (CP) holdings, most of this week’s energy was deployed in research on the corporate votes, and in 3M’s case, tender decisions.
3M (MMM)
I now am forced to decide my future course with 3M as the proxy notice arrived on the Neogen (NEOG) spin/merger. Next week is also past their ex-dividend date. Third is the future spin of the health care division. Finally, there are the litigation battles largely over military earplugs. With so many moving parts, let’s assess my feelings on each component.
The initial baseline is:
- Ancillary Holding
- Cost Basis: $158.13
- Current Price: $145.20
My view is the Neogen factor is foremost as the deadline is August 29th. In this offer, the choices are to do nothing or exchange all or part of my MMM for NEOG the ratio to be set after market close on the 29th. Therefore, any analysis on the merits is moot.
Neogen is an interesting critter with their business and ongoing necessity of their services. However, with no dividend and the drop in price it appears the market doesn’t look kindly on this transaction.
My basic concern resides with the residual following the health care spin. Do the remaining businesses have what it takes to keep the dividend safe? What if a black swan hovers over the earplug BK proceedings – meaning 3M’s liabilities are greater than anticipated?
With all the unknowns the better part of valor is to sell at a slight loss next week capturing one last dividend and reassess if the dust settles.
With the dividends collected I’ll book a positive total return but be able to report a capital gain loss on taxes – meaning over the eight years this investment was dead money.
ABB (ABB)
Another corporate action was in the form of ABB’s spin of its turbocharging business to be named Accelleron. It’s profitable and as a mature business will likely pay a dividend. The spin ratio as been set at 1 Accelleron share for every 20 ABB shares plus .0005CHF.
As an ancillary holding, I have less than the 20 ABB share threshold so initial expectations are to receive a cash-in-lieu payment rather than a fractional Accelleron share. Except for this blurb from page 28 of the investor brochure:
Citibank, N.A., as depositary for the ABB ADRs, has
indicated to ABB that it intends to distribute the Ac-
celleron shares it receives in the spin-off distribution
in the form of Accelleron unsponsored ADRs to hold-
ers of ABB ADRs as of an ABB ADR record date to be
announced by Citibank, N.A., as depositary for the
ABB ADRs. The terms of the Accelleron unsponsored
ADRs will be detailed in a registration statement on
Form F-6 that Citibank, N.A., as depositary for the
Accelleron ADRs, intends to file with the U.S. Securi-
ties and Exchange Commission (SEC) prior to the
distribution of the Accelleron ADRs.
Meaning: my fate won’t be known officially until Citi (C) establishes the ADR ratio and whether it remains at the current 1:1 that ABB enjoys which should become known sometime between September 7th and October 22nd. Regardless, my vote was cast as aye.
Prologis (PLD) Duke Realty (DRE) Merger
This week’s final action was the Prologis and Duke Realty merger for the September 28th shareholder meetings. As a holder of both sides, my votes all were cast in favor. The deal remains on track to close by year end.
Green Natural Gas?
Here’s a mind bender for your pleasure. Last month’s news included the European classification of natural gas as renewable. With their focus on carbon neutrality, any setback in achieving the aggressive targets can reduce funding for some programs and increase the difficulty in hitting their legal obligations.
It’s not a wholesale retreat, natural gas to generate electricity or to heat or cool home will now be considered sustainable. The issue I have is once again politicians are whitewashing an issue. Spinning a narrative doesn’t make natgas green – just suspend the targets as needed until the crisis caused by Putin’s War ends. Which is why I probably would have made a lousy political hack.
Have a good week!
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