KLX Inc (KLXI): Farallon Capital Discloses New Stake in B/E Aerospace Inc (BEAV)’s Spin-Off

Farallon Capital, a fund launched by Thomas Steyer in 1986, has recently added KLX Inc (NASDAQ:KLXI) to its equity portfolio. According to a new filing with the Securities and Exchange Commission, Farallon currently owns some 3.68 million shares of the company. The stake is passive by nature and amasses 7.0% of KLX’s outstanding common stock.


With an equity portfolio of over $6 billion, Farallon is a fund that was founded by Thomas Steyer, a former financial analyst at Morgan Stanley’s mergers and acquisitions department. Even though the fund has a diversified equity portfolio, it invests primarily in Services, Technology and Financial stocks. At the end of September, two largest holdings in Farallon’s equity portfolio were represented by  DIRECTV (NASDAQ:DTV) and Covidien plc (NYSE:COV). Both stakes amassed around 5% of the fund’s total portfolio and have been initiated during the second quarter and raised significantly during the July-September period. While DIRECTV, of which Farallon owned 3.65 million shares (up by 288% on the quarter) appreciated only slightly since the second quarter of 2014, Covidien jumped by 56% on the back of its acquisition by Medtronic, Inc. (NYSE:MDT) that was completed on January 26, while Farallon held 3.64 million shares at the end of September.

In its previous filing, Farallon disclosed entering into a lock-up agreement with Hudson Pacific Properties Inc (NYSE:HPP), of which it owns 8.74 million shares. Under the terms of the agreement, Farallon, which holds an activist stake equal to 10.9% of the company, agreed not to sell any shares of the company for the next 60 days.

Farallon’s latest acquisition, KLX Inc (NASDAQ:KLXI), is a company that has been publicly traded for a bit over a month now, after it was spun off from B/E Aerospace Inc (NASDAQ:BEAV). KLX operates in two segments, Aerospace Solutions Group and Energy Services Group and is engaged in distribution and servicing of aerospace fasteners and consumables. Since it went public, the company that has a market cap of $2.0 billion, lost around 19%.

B/E Aerospace Inc (NASDAQ:BEAV) conducted the spin-off via a dividend distribution of all KLX Inc (NASDAQ:KLXI) stock to the shareholders of B/E Aerospace, under the terms of which each shareholder received one KLX share for every two shares of B/E Aerospace Inc (NASDAQ:BEAV). The decision to spin-off the consumables division of B/E will allow the companies to benefit from a better management focus and will provide more value to shareholders.

KLX Inc (NASDAQ:KLXI) is yet to disclose its financial results for the first quarter since becoming an independent company, but as for now analysts are not very thrilled about the stock, which has a consensus ‘Hold’ rating. Earlier this year, Deutsche Bank lowered price target on the stock to $46.00 from $48.00 reiterating ‘Hold’ rating, while RBC Capital initiated coverage with ‘Sector Perform’ rating. On the other hand, a couple of weeks ago, KeyCorp upgraded the stock to ‘Buy’ from ‘Hold’.

Among other shareholders of KLX Inc (NASDAQ:KLXI) is Daniel S. Och‘s OZ Management, which revealed holding around 2.90 million shares, equal to 5.51% of the company’s stock, right after the company went public. OZ Management also disclosed holding 5.67 million shares of B/E Aerospace Inc (NASDAQ:BEAV) in its latest 13F filing. On the insiders side, at the end of 2014, Heather Floyd, the vice-president of finance and controller of KLX Inc (NASDAQ:KLXI), sold 123 shares of the company at $41.15 per unit, trimming its stake to 5,395 shares.

Disclosure: none