Equity Highlights August 2024

Welcome to Broyhill's Equity Highlights, where we share a few quick takes on recent news across the portfolio every month.  

We aim to make these highlights easy to read and easy to repeat. Feel free to share our work! 

Philip Morris to expand Zyn production in US with new plant in Colorado. Shortages of Zyn cans in-store and online over the last quarter led to Philip Morris' recent announcement to increase capacity. We expected an announcement of the sort, given increased demand, and expect PM to continue building out capacity through the end of this year and into 2025. PM is also expected to launch its heated tobacco device, IQOS, in Austin, TX. I have been in contact with local associates who will keep us in the know about the launch!

Philip Jansen targets Rentokil takeover. Rentokil, a large pest control company, has struggled since its acquisition of Terminix in 2022. While integration issues continue to plague the stock, we see multiple ways to win, including operational improvement at the helm of activist Trian Partners, a potential takeover by PE and former BT CEO Philip Jansen, and/or a US listing.

Baxter Announces Definitive Agreement to Divest Its Vantive Kidney Care Segment to Carlyle for $3.8 Billion. After months of uncertainty related to the fate of Baxter's Kidney Care segment, PE group Carlyle finalized its agreement to purchase the segment. The sale will allow Baxter to pay down 2024 debt maturities rather than refinance them at prevailing rates. From there, we expect Baxter will continue to improve operationally with a greater focus on core revenue growth and margin expansion.

Abbott shares slide after trial verdict, weigh on rival Reckitt Benckiser. In the second of potentially thousands of trials against Abbott and Reckitt Benckiser over infant formula, a jury awarded an Illinois mom $495MM in damages. This was higher than the market's expectations, and Reckitt announced it would explore strategic alternatives to the nutrition segment during its most recent earnings call. 

Disclosures