In a concerted move to increase liquidity, Compass Diversified Holdings LLC CODI recently divested part of its controlling interests in recreational vehicle parts manufacturer, Fox Factory Holding Corp FOXF. The strategic move will improve the financial flexibility of Compass Diversified and enable it to capitalize on any favorable acquisition opportunities in the future.
In the latest transaction, Compass Diversified sold 3.5 million shares of Fox Factory for net proceeds of $71.8 million. With this divesture, Compass Diversified's ownership in Fox Factory reduced from approximately 23% to 14% at present.
In Jan 2008, Compass Holdings acquired a controlling interest in Fox Factory for $80.9 million. Headquartered in Watsonville, CA, Fox Factory designs and manufactures high-end suspension products for mountain bikes, all terrain vehicles, snowmobiles and other off-road vehicles since its inception in 1974. It operates as a tier one supplier to leading action sport original equipment manufacturers, retailers and distributors.
Compass Diversified has periodically divested its ownership stake in Fox Factory to improve liquidity. In Mar 2016, it sold 3 million Fox Factory common shares for net proceeds of $47.7 million to reduce its ownership stake from approximately 41% to 33%. Subsequently, in Aug 2016, Compass Diversified sold 3.5 million shares for $63 million in net proceeds to further lower its ownership in Fox Factory to 23%.
Compass Diversified owns profitable middle market businesses that cater to the individual market niche segment. The company has controlling interests in eight diversified businesses and creates shareholder wealth by proactively managing these entities. In addition, the company often monetizes its controlling stake in these businesses to improve its return on investment.
Compass Diversified currently sports a Zacks Rank #1 (Strong Buy). A couple of other favorably ranked stocks in the industry include Danaher Corp. DHR and Macquarie Infrastructure Corporation MIC, both sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Danaher is currently trading at a forward P/E of 22.1x and has beaten estimates thrice in the trailing four quarters, the average positive earnings surprise being 6.1%.
Macquarie Infrastructure is currently trading at a forward P/E of 69.0x and has beaten estimates twice in the trailing four quarters, the average positive earnings surprise being 29.6%.
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