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Deep Dive

Philip van Doorn

March 29, 2019, 8:00 a.m. EDT

These three big companies are aiming to unlock value for stock investors

David Marcus of Evermore Global Advisors discusses Fiat Chrysler, DowDuPont and Vivendi

By Philip van Doorn, MarketWatch

Fiat Chrysler’s business units include Alfa Romeo, Fiat and Jeep. David Marcus of Evermore Global Advisors says the company’s shares are compelling because of their low valuation to earnings estimates.

David Marcus, chief executive officer of Evermore Global Advisors, is attempting to identify companies that are transforming their businesses and create value for shareholders through mergers, spinoffs, asset sales or improved efficiency.

Evermore, based in Summit, N.J., has $1.1 billion in assets under management, including $558 million in the Evermore Global Value Fund (NAS:EVGBX) . Marcus meets with as many management teams as possible, especially in Europe, to assess their business strategies.

Three companies he’s focusing on are DowDuPont, Vivendi SA and Fiat Chrysler Automobiles. (PAR:FR:VIV)


In August, Marcus said he expected DowDuPont  to be “a gift that keeps on giving” for patient investors because of CEO Edward Breen’s plan to split the company into three focused publicly traded entities — the original plan when the former DuPont & Co. merged with the old Dow Chemical in September 2017.

DowDuPont’s commodity chemical business is scheduled to be spun off April 1 as the new Dow. That action will be followed by the splitting of the remaining assets into Corteva (agricultural chemicals) and the new DuPont (specialty chemicals). DowDuPont has already announced that the new Dow will begin paying $2.1 billion in annual dividends and initiate a $3 billion share-buyback program.

Marcus said he plans “to keep all the pieces” of the separated DowDuPont “at least initially.”

“The market doesn’t usually revalue these stocks until the spinoff actually happens,” Marcus said in an interview March 27. Indeed, after he discussed DowDuPont’s plan to unlock value with MarketWatch on Aug. 14, the shares pulled back 20% (with dividends reinvested) through the end of 2018. (The stock was flat for 2019 through March 26.) The brutal decline for DowDuPont helped feed a 21% drop for the Evermore Global Value Fund’s investor share class in 2018.

Marcus said “significant fears about the global slowdown” were the main factor driving down DowDuPont’s share price, but his firm “bought from last summer through year-end,” after initially buying shares in June, to take advantage of the falling price.

When discussing the fund’s performance in 2018, Marcus said, “we are special-situation investors, which means a lot of investments we have trigger from announcements breakups and restructuring.” And that means the fund’s performance will often be disconnected to the performance of the S&P 500 (S&P:SPX) , the Dow Jones Industrial Average (DOW:DJIA)  and the fund’s Morningstar category.

Marcus said he had reached out to many shareholders of the fund to explain the poor recent performance and how it related to his strategy. He is confident about the setup now.

“This is probably the cheapest portfolio we have since I started the firm about 10 years ago,” he said.

After the split-up of DowDuPont, Breen (whom Marcus called “the architect of the breakup”) will be CEO of the new DuPont. Marcus says he expects more spinoffs to come, unlocking more value for investors as the new DuPont’s specialty chemicals business is already organized into what could eventually become four separate companies.


Vivendi (PAR:FR:VIV)   (OTC:VIVHY)   (OTC:VIVEF)  is effectively controlled by Bollore SA (PAR:FR:BOL) (OTC:BOIVF) , which owns 26% of Vivendi’s shares. The Evermore Global Value Fund holds shares in both companies.

“We really like family-controlled businesses, where there is a dynamic value creator at the top,” Marcus said. Vivendi’s chairman is Yannick Bollore.

Marcus began buying shares of Vivendi in April 2012. He stressed that “we always start with a small bite and nibble our way up to significant position sizes over time … especially when these stocks are meandering or declining.” Over the past seven years through March 26, Vivendi’s shares (those listed in France) have returned 190%, including a 21% return in 2019, but Marcus believes they are still “grossly undervalued.”

Vivendi owns Universal Music Group, as well as 24% of Telecom Italia SpA (MIL:IT:TIT) , the largest telecommunications provider in Italy. Vivendi plans to sell up to half of Universal Music to form a strategic partnership. This sale could “bring in somewhere between 11 billion and 13 billion euros ($12.4 billion to $14.6 billion),” Marcus said, leading, he expects, to higher dividends and share buybacks, as well as “a war chest to go after other undervalued media assets.”

There is no predicting which company will jump on the opportunity, but Marcus listed Tencent Music Entertainment Group (NYS:TME)  (a unit of Tencent Holdings (HKG:HK:700) (OTC:TCEHY)   (OTC:TCTZF) ) as a possible partner for Vivendi’s Universal Music businesses, as well as KKR (NYS:KKR) .

“If you want to get radical, could Apple (NAS:AAPL) , Amazon (NAS:AMZN)  or Spotify (NYS:SPOT)  be interested? This would marry content and distribution. We are in an environment where so many interesting and creative solutions will happen as media companies continue to transform,” he said.

He expressed admiration for Bollore SA’s long record of building value by acquiring businesses, improving them and selling them for a profit. “They are very good at transforming underperforming assets into good ones. They also [pay] bonus dividends to their shareholders,” he said.

Fiat Chrysler

Marcus mentioned Fiat Chrysler Automobiles  as an attractive conglomerate that has been “on a diet” for many years, especially under the leadership of Sergio Marchionne, who helped put together the 2009 deal that combined Fiat and Chrysler and is widely credited with turning both business units around. Marchionne died in July, but Marcus said “he groomed an excellent team.”

Recession fears are always bad for car stocks. Here’s how Fiat Chrysler’s American depositary receipts fared last year, along with shares of General Motors (NYS:GM)  and Ford Motor (NYS:F) :

Company Ticker Total return - 12 months Price/ consensus EPS estimate for next 12 months
Fiat Chrysler Automobiles NV -29% 4.7
General Motors Co. (NYS:GM) 7% 5.6
Ford Motor Co. (NYS:F) -14% 7.4
 Source: FactSet

During this same 12-month period, the S&P 500 returned 8.2%.

Those forward price-to-earnings ratios are low, especially when compared with ratios of 16.4 for the S&P 500 and 15.3 for the benchmark index’s industrial sector.

Marcus began buying shares of Fiat Chrysler in July 2018. He called Fiat’s Chrysler acquisition, in the aftermath of the U.S. financial crisis, “one of the great investments in the auto industry of all time.”

Exor NV (MIL:IT:EXO) (OTC:EXXRF)  holds 29% of Fiat Chrysler’s shares and is in effective control of the company. Exor is another example of a family-controlled conglomerate that Marcus owns. It is controlled by the Agnelli family. Marcus described Exor CEO John Elkann (who is also Fiat Chrysler’s chairman) as “sort of the patriarch of the Agnelli family, but he is only in his mid-40s.”

Marcus said one of the reasons most auto-manufacturer stocks haven’t been performing well is “this view that autonomous driving will revolutionize the industry.”

“While that may be true ... Fiat Chrysler is a real cash machine,” he said.

Marcus also touted Fiat Chrysler’s ability to “get value out,” with the company’s recent sale of its car-parts business to KKR for seven billion euros as an example.

That move hasn’t done much for Fiat Chrysler’s shares, at least in the short term, but Marcus is confident the company and Exor will remain “aggressive in terms of managing their industrial assets.”

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