ContextLogic (LOGC): Acquistion, Update, and Valuation
Update after LOGC makes a $900mm acquisition of US Salt
Last week, ContextLogic announced the huge $908mm acquisition of US Salt. The deal was partially financed by David Abrams’ Abrams Capital and is the first step in ContextLogic turning into an acquisition platform and monetizing its $2.9bn in Net Operating Losses (‘NOLs’).
You can read my full thesis on ContextLogic from July here, but essentially the company had no operations, $6.7/shr in cash, and NOLs worth up to $13.4/shr on an undiscounted basis. The stock traded at the cash value of $6.7 and in my view the company was likely to make an acquisition over the next six months that would act as a catalyst to monetize the NOLs. That acquisition was announced last week.
This update discusses:
The deal and likely NOL usage
Funding sources and new ownership structure
Incentives for Abrams Capital and BC Partners
ContextLogic becoming a serial acquirer
US Salt
The Deal and NOL Usage
The deal values US Salt at a $908mm EV, with another $35mm in fees for a total transaction value of $943mm.