I found a way to access Bloomberg’s no.1 competitor for 90% less. Here’s how →
Today’s business has a market cap of roughly $18m.
In exchange for that acquisition cost we get roughly $17m-$20m of tangible net assets that I think could realistically be converted into cash in a non-rushed scenario.
This, of course, means that we get the operating business, and all its future cash flows for free.
That same operating business has generated positive OCF consistently for the last 7 years.
After adjusting for some temporary expenses, it’ll probably continue generating around $3m of owner-FCF per year, for the foreseeable future.
This gives us a multiple of 6x FCF.
Normally, I’m the kind of guy that would start scrunching up his nose and muttering under his breath about things being ‘too expensive’ at that kind of multiple.
But, there’s more.
This business owns five consumer brands that generated over $110m in revenue last year alone.
Three of them are category leaders, with market shares of 36.3%, 67.1% and 26.9%.
Recently, the company sold a weaker, non-core brand for around 0.36x sales.
It also previously bought a health-brand business for around 1.4x sales.
Despite them being dominant in their niche, I just assume they could only be sold for less than the weak brand they actually sold.
In other words, I valued this portfolio of brands at just 0.33x sales, which gives us a resale value of roughly $37m.
Or, twice the entire market cap.
So, we pay $18m, get roughly $18m worth of tangible net assets, $3m per year in owner-FCF and a bunch of brands almost certainly worth at least $37m, in the real-world.
Of course, the income statement looks like something out of a 90’s horror movie.
But that’s exactly how these kind of opportunities arise.
Let’s take a look.