CNSWF - MCJ Capital - Constellation Software: An Exciting Acquisition Machine
2023-11-08 08:05:00 ET
Summary
- Constellation Software has deployed over $2 billion on acquisitions this year, exceeding last year's total.
- The company's acquisition machine is showing agility, completing deals of various sizes.
- CSU shareholders have been issued debt instruments that offer attractive returns and flexibility.
The following segment was excerpted from this fund letter.
Constellation Software ( CNSWF , CSU:CA )
Outside of Copart, our shares of Constellation Software have been the best performers of the year. However, it’s the progress of Constellation Software’s acquisition machine that we should be excited about.
Constellation Software continues to defy the gravitational rules of modern-day capital allocation. As of September, CSU has deployed over $2 billion on acquisitions this year, exceeding the $1.7 billion total last year. The company is showing agility, completing deals as large as a quarter of a billion dollars and as small as one million.
If you look closely at your account you’ll notice a funny little ticker that goes by “CSU.WTS.” These are rights issued to CSU shareholders for a CSU debt instrument. Mark Leonard has always championed priority for the CSU shareholder base to have first participation in capital raises offered by the company, which is why we were given these rights.
The debt that these rights entitle one to are hybrid instruments that offer 6.5% plus the overall change in inflation. To our applauds as equity owners, the debt requires no asset pledges, no covenants, and should it be needed, CSU can stop paying interest on the debentures.
You may be asking why would someone would want to hold these debt instruments. For debt investors CSU offers an attractive diversified cashflow stream along with the same tenants we’re fond of as equity investors of the company. As to the value for us, these rights trade about at the cost of what it would take for us to liquidate them.
Considering we only deal with equity at this moment, we’ll let our rights expire and take pleasure in knowing the debt raise is likely indicative of confidence the Constellation team has in continuing to deploy capital in the acquisition machine, and at such high rates of return.
| MCJ offers investment advisory services and is registered with the state of Colorado. Registration does not constitute an endorsement of the advisory firm by the Colorado Securities Commissioner nor does it indicate that the advisory firm has attained a particular level of skill or ability. All content on this webpage is general in nature, not directed or tailored to any particular person, and is for informational purposes only. Neither this webpage nor its contents are offered as investment advice and should not be deemed as investment advice or a recommendation to purchase or sell any specific security. In addition, neither this webpage nor its contents should be construed as legal, tax, or other advice. Individuals are urged to consult with their own tax or legal advisers before entering into any advisory contract. The information contained herein reflects the current expectations and opinions of MCJ as of the date of publication, which are subject to change without notice at any time. MCJ does not represent that any expectation or opinion will be realized. While the information presented herein is believed to be reliable, no representation or warranty is made concerning the accuracy of any data presented. Neither MCJ nor any of its advisers, officers, directors, or affiliates represents that the information presented in this tear sheet is accurate, current or complete, and such information is subject to change without notice. No representations or warranties whatsoever are made by MCJ or any other person or entity as to the future profitability of an investment account or the results of making an investment. Past performance is not indicative of future results. Additional information is available from MCJ upon request. MCJ is not acting as your adviser or agent unless and until you and MCJ sign an investment advisory agreement. Readers are advised that the material herein should be used solely for educational purposes. This memorandum expresses the views of the author as of the date indicated and such views are subject to change without notice. MCJ Capital Partners LLC does not purport to tell or suggest which investment securities members or readers should buy or sell for themselves. Readers should always conduct their own research and due diligence and obtain professional advice before making any investment decision. MCJ Capital Partners LLC will not be liable for any loss or damage caused by a reader's reliance on information obtained in any of our newsletters, presentations, memorandums, special reports, email correspondence, or on our website. Our readers are solely responsible for their own investment decisions. The information contained herein does not constitute a representation by the publisher or a solicitation for the purchase or sale of securities. Our opinions and analyses are based on sources believed to be reliable and are written in good faith, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. All information contained in our newsletters, presentations or on our website should be independently verified with the companies mentioned. The editor and publisher are not responsible for errors or omissions. MCJ Capital Partners and accounts actively managed by MCJ Capital Partners have long positions in Constellation Software (CSU.TO), RediShred Capital Corp (KUT.V), Judges Scientific PLC (JDG.L), Kneat.com (KSI.TO) and Copart ( CPRT ) and would benefit from overall price appreciation of the stocks. At any time we may close these positions without notice. |
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
For further details see:
MCJ Capital - Constellation Software: An Exciting Acquisition Machine