Schmitt Industries: Special Situation With 25% Upside [Seeking Alpha]
Schmitt Industries, Inc. (SMIT)
US:NASDAQ Investor Relations:
investor.schmitt-ind.com/investor-relations
Company Research
Source: Seeking Alpha
Schmitt Industries: Special Situation With 25% Upside Summary It was announced on October 10th that Schmitt Industries (SMIT) would sell off one of its main businesses – Schmitt Dynamic Balance Systems (SBS) – for $10.5mm in cash. This deal offers 25% upside for shareholders of Schmitt, since the entire company is only worth around $13mm. Schmitt Industries may pay out a special dividend or buy back stock with the cash, or it may put it to work improving the existing business. SMIT has a net current asset value of $7.6mm, and therefore trades at just under 2x net current assets. However, when factoring in the $10.5mm gained from the strategic sale of SBS announced on October 10th only briefly traded below its NCAV Potential Tax Implications There may be some tax liability associated with the transaction. It has not yet been filed, but I’ll walk through it here: Mr. Market’s Valuation Mr. Market believes that the transaction only has a time-discounted 32.6% chance of going through
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