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Summary

  • Trustees of Hubbell family trusts resign. External trustee appointed to oversee those trusts.
  • The event makes a buyout or dual share collapse more likely but with significant gains already one could close the arbitrage trade now.
  • HUB-A has moved from a 12% discount to HUB-B to a premium.
  • The movement in the spread was anticipated by my previous article.

This is an update to the article I wrote in October on Hubbell (NYSE:HUB.A) and its Dual Class Structure. Less than three months after the article was published, an activist, Ancora Advisors, LLC, sent a letter to the board of directors asking for the elimination of the dual class structure. The letter detailed the benefits to shareholders of both HUB-A and Hubbell's B shares (NYSE:HUB.B). The activist suggested that by collapsing the share structure there would be increased liquidity for both classes and the company's valuation would likely increase.

Then on June 6 in an SEC filing, Hubbell reported that Directors Andrew McNally IV and G. J. Ratcliffe, and Assistant General Counsel and Assistant Secretary, John Mulvihill, the Trustees of the Hubbell family trusts, had resigned. The company said that an external trustee was appointed to oversee those trusts. The Hubbell family trusts own almost half of the Class A shares so this development could increase the chances for the collapse of the company's A and B shares.

Meanwhile HUB.A has rallied 32.1% from $93.91 to $124.08 while HUB.B has advanced only 13.5% from 104.57 to $121.77. The 12% discount has turned into a 2% premium. To refresh, the major difference between the two classes is that the A shares are entitled to 20 votes per share while the B shares get just 1 vote per share. In a buyout, dual class shares either get sold for an identical price or the shares with the super voting rights, in this case the A shares, are afforded a premium. A holder of the long A shares/short B shares arbitrage could continue holding hoping for a buyout or dual share collapse that pays the class A shareholders more than the class B shareholders. Or simply unwind the trade and book a handsome profit.

Source: Update: Hubbell-Change In Trustee To Hubbell Family Trusts Has Moved Class A Shares From Steep Discount To Premium