I spoke to the company today. Apparently, the conference call discussed more details regarding the "strategic alternatives." By the end of September, NOV will announce their plans for a spinoff or dividend to shareholders of one of the companies. This deal should be completed by year-end. The most likely plan will be to separate the contract therapy business (which has been the reason for the depressed stock price) from the outpatient services/occupational health/O&P businesses. The latter businesses have been growing at a rapid pace, and should grow by 40+% next year, while the contract therapy business should be up only slightly. NOV wouldn't say which part would retain the 71% interest in NCES. But the NOV contract for NCES will not change to NCES' disadvantage. I suspect that the contract therapy business (long-term care) will keep the PEO interest, and the other 3 businesses will separate. This way the contract/PEO segment can deliver long-term growth in the mid-teens, while the other businesses could deliver long-term growth in the 30% range. The company said it may use the spinoff as an opportunity to raise some capital, perhaps through equity or even debt (although I doubt the latter option).
Overall, the outlook for NOV's businesses is very good, and the stock is a giveaway at current prices. Actually, the outpatient/O&P/occupational health businesses are near-giveaways, as the current price reflects only the contract and PEO interest.
And FWIW, NCES is a steal, too.
Todd |
