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Laurent Chekroun | 20 Mar 2026 | Prices as of 19 Mar close

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FT makes the structural case: conglomerates trade at persistent SoP discount, management spread thin, cheap ETFs kill the diversification rationale. Below are the trades with yesterday's closing prices.

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I. PURE-PLAY RERATING

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- HON US close: $234.51

- SpinCo (HONA) targets Q3 2026 listing; Form 10 filed; $16bn notes priced Mar 16

- Investor Day June 3 Phoenix — next de-risking event

- SpinCo comps: Safran/Heico/TransDigm 22-28x EV/EBITDA vs HON blended ~17x

- Implied SpinCo upside: 25-35% to comp range

- Short RemainCo: automation + building, softer industrial cycle

- Risk: Middle East disruption flagged by mgmt — pushing ~high-single-digit Q1 revs to Q2

- SIE prev close: €218.10 (intraday Mar 19 touched €210, -21% from €275.75 ATH Feb 12)

- Margins near-doubled since 2018 spin programme (7% → 13.5%E 2026)

- Residual SoP discount ~12%; DI inventory correction inflecting

- Pair vs SAP neutralises German tech beta

- Risk: China DI ~35% of segment; German recession

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II. COCOA PAIR — CORE TRADE

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- HSY US: ~$235 | MDLZ US: ~$57

- Cocoa futures -40% from peak

- HSY ~85% chocolate — full input cost tailwind

- MDLZ: biscuits/gum/cheese ~50% revs dilute cocoa benefit; hedged into 2026

- MDLZ mgmt explicit: cocoa normalisation materialises in 2027, not 2026

- FY26E gross margin uplift: HSY ~380bps vs MDLZ ~90bps

- HSY raised FY26 adj EPS guidance $8.36 (+32% YoY) at Q4 earnings

- Spread near 18M wides on relative PE

- Horizon: 6-9M

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III. BASF GY — SoP ARBITRAGE + CARRY

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- BAS GY close: €46.13 (-4.5% Mar 19 — post FY guidance miss)

- 2026 EBITDA guidance €6.2-7.0bn vs consensus €7.02bn → entry point

- Trades 7.5x EV/EBITDA vs chem peers 11-14x standalone → 25-30% SoP discount

- Dividend yield ~4.9% at €46.13 (€2.25/sh) as carry

- Catalyst: activist entry or Ludwigshafen restructuring inflection

- Hedge: short LXS GY (close €11.82; -57% past 12M; Q1 results out today)

- Note: LANXESS reporting Mar 19 — watch for post-earnings short entry

- Horizon: 12-24M, patient

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IV. PE EXIT WATCH

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- Close: €63.22 (ex-div Mar 16; €1.80/sh)

- Advent/Cinven seeking TK Elevator exit

- Elevator comps: 18-22x EV/EBITDA — TK Elevator EBITDA ~€1.5bn → EV €22-28bn

- Kone most logical strategic buyer (European footprint overlap)

- 52W range €45.42-€63.02 — at top; add on any pullback

- Horizon: 6-18M, process-driven

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V. STRUCTURAL SHORT

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- Close: ~$22.00 (52W high $33.35; -35% YTD)

- CEO Cahillane paused split plans Feb 2026 — no near-term catalyst

- Q4: sales -3.4%, $9.3bn impairment, full-year EPS guidance cut

- Volume -2 to -3% YoY; D/EBITDA ~4x; brands in secular decline

- FT: "splits are no cure if portfolio stuffed with brands people aren't keen to buy"

- Short on any rally above $24 driven by activist/split speculation

- Analyst consensus $26 → 18% above current — risk to manage

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VI. SYSTEMATIC OVERLAY

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- Desai et al.: +30% CAR in 3Y post-spin

- Basket: HONA (Q3 listing) / Solventum / Vestis / Technip Energies

- Rebalance quarterly; academic alpha 8-12% annualised

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PRICE TABLE (19 Mar 2026 close)

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Name Ticker Price Note

HON HON US $234.51 HONA spin Q3 2026

Hershey HSY US ~$235 Raised FY26 EPS guide

Mondelez MDLZ US ~$57 Cocoa hedge 2026; norm 2027

Kraft Heinz KHC US ~$22 Split paused; -35% YTD

BASF BAS GY €46.13 EBITDA miss; -4.5% Mar 19

Siemens SIE GY €218.10 -21% from ATH; DI recovery

LANXESS LXS GY €11.82 -57% 1Y; Q1 results today

Kone KNEBV FH €63.22 Ex-div Mar 16; near 52W high

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SUMMARY

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Trade Direction Horizon Catalyst

HON SpinCo L HONA / S RemainCo 12-18M Listing + Jun 3 Inv Day

Siemens L / S SAP 6-12M DI orders

HSY/MDLZ L/S mkt neutral 6-9M H2 margin delivery

BASF L / S LANXESS 12-24M Activist / restructure

Kone Long M&A premium 6-18M PE exit process

KHC Short on rally 6-12M Volume miss / split fomo

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Laurent Chekroun

Makor Capital Markets | Graham Advisors SARL

For institutional clients only

Investors are better able to value pure plays, while lacklustre units can dilute overall growth and margins at sprawling companies

For a species that went out of fashion decades ago, conglomerates are surprisingly tenacious. Asia is full of them; America’s century-old industrial Honeywell is only this year hiving off its aerospace business. Even after a wave of disposals, the likes of chemicals group BASF have more to shed to become single-focus plays. Sometimes splitting up is just too damned hard. Kraft Heinz paused plans to do so. It also failed to make good on a plot to combine pantries with Unilever.

The longstanding case against conglomerates, which virtually all trade at a discount to the sum of their parts, is twofold. Investors are better able to value pure plays, and wince as lacklustre units dilute overall growth and margins. Operationally, management is spread thin, inefficiencies emerge and capital allocation becomes a bunfight.

To this, add the unwinding of one-time supposed benefits: synergies from plugging several businesses into centralised back-office processes like IT are smaller now that technology has scythed these costs. From an investment perspective, diversity can be bought more productively: there is an entire universe of ETFs offering exposure to every sector under the sun.

Former conglomerates have often benefited from slimming down. Siemens’ share price has been on the ascent since it began hiving off units in 2018. Operating margins have improved, more or less steadily, since then; next year’s forecast of 13.5 per cent, according to Visible Alpha, is almost double 2018 levels. A sweeter example: confectioners Hershey and Barry Callebaut are set to benefit more, in percentage terms, from falling cocoa prices than broader food peers Nestlé and Mondelez.

Another camp in favour of slicing up conglomerates includes management consultants, investment bankers and others that advise on splits and other financial gymnastics. These have yielded over $3bn in the past five years for investment banks. Look at Mead Johnson Nutrition, originally spun off from Bristol Myers Squibb and eventually acquired by Reckitt. When the consumer goods conglomerate sold the China part of its infant formula business, £200mn of the $2.2bn price tag went on transaction and other costs.

A lot depends on the quality of assets that a company has. That’s an issue Kraft Heinz grapples with: splits are no cure if your portfolio is stuffed with brands that people aren’t keen to buy. By contrast, Berkshire Hathaway is the ultimate example of a conglomerate investors actually like.

Private equity companies are the modern incarnation of the conglomerate — often picking up the businesses such behemoths hive off. KKR bought Unilever’s spreads business; Advent and Cinven acquired Thyssenkrupp’s elevators unit, and are now reportedly selling it. Their model contains extra spice though: scooping up management and performance fees on a portfolio of businesses is more lucrative than simply running them.

SpaceX targeting mid-June 2026 IPO at $1.5T valuation / ~$50bn raise

Blue Origin filed FCC for "Project Sunrise" — up to 51,600 data-center sats

Comes weeks after SpaceX own FCC filing for orbital AI compute constellation

KEY POINT: Blue Origin threat ≠ near-term / IS relevant for IPO valuation math

- $1.5T / 94x 2025 revenue embeds near-monopoly assumption on orbital compute

- Blue Origin structural advantage: New Glenn (launch) + TeraWave (connectivity) + Project Sunrise (compute) + AWS (enterprise anchor tenant)

- SpaceX has no hyperscaler equivalent — AWS enterprise relationships are real moat

- 5,408 LEO/MEO sats / 6 Tbps speeds / enterprise + govt focus

- First deployment: Q4 2027 — vs Starlink 9,600+ operational today

- Analyst math: deployment cadence "doesn't add up" given New Glenn capacity

- Not consumer broadband — dedicated enterprise / data center / defence

- 51,600 sats in sun-synchronous orbit / solar-powered orbital compute

- Thesis: continuous baseload AI compute without terrestrial grid draw

- Google Suncatcher / Starcloud already testing orbital GPU infra

- SpaceX xAI acquisition is direct response to this narrative

Blue Origin not a 2026 IPO risk — IS a 3-5yr narrative risk

Watch: New Glenn cadence / AWS-TeraWave integration announcements / S-1 competitive section wording

LC

War in the Middle East is disrupting supplies and driving up prices

Airlines are drawing up contingency plans to deal with potential jet fuel shortages, which they fear could take hold within weeks as war in the Middle East threatens supplies and drives up prices.

Aviation executives said they were struggling to get assurances about the availability of fuel beyond the next month.

“We’re putting in plans today to draw up scenarios on how we would deal with the shortage of fuel,” said Ben Smith, chief executive of Air France-KLM. This includes cutting services to parts of Asia in case refuelling for the return journey to Europe becomes more difficult. 

“South-east Asia is much more dependent on fuel coming over the Gulf than Europe is,” Smith told the FT. “We can get fuel out of Europe, but when we go to [a] south-east Asian city we’re not going to be able to fly the plane back . . . If there’s no fuel, you can’t fly.” 

EasyJet boss Kenton Jarvis said fuel suppliers will not give guidance on availability beyond the next month.

Suppliers had reassured the airline they have fuel for the next three weeks, he said. “But no one’s really telling us ‘we have no immediate issues in six weeks’, because they’re not prepared to say that,” he added. 

Some energy traders believe jet fuel shortages are inevitable in parts of the world. 

They said that while some countries, including in Europe, have healthy reserves, planes still need to refuel at their destinations and cannot carry enough for return trips.

Other fuels facing shortages include marine fuel and LPG.

The immediate risk is mitigated because airports typically have significant stocks.

Hari Marar, chief executive of India’s Bangalore International Airport, said it has fuel for about 25 days on site or nearby. Shortages are not “an immediate concern,” he said. “Price is a different matter and that will definitely impact our airline partners.”

However, Vietnam has already warned of the possibility that flights from the country will have to be limited. 

“This is a bigger supply issue than we’ve seen before,” said Willie Walsh, the former British Airways CEO who now runs industry group Iata.

Several airport executives told the FT this week that they face shortages of fuel that may force them to limit flights in the coming weeks. 

“In the short term, the big issue is not so much the fuel prices as whether there is going to be enough,” said Justin Erbacci, head of global airports industry group ACI World. “Everybody’s worried right now about potential availability.”

Jet fuel prices have doubled since the US and Israel launched strikes on Iran last month. North-west European prices hit an all-time high on Wednesday, closing at $1,730 a tonne, beating a record set on Monday to reach roughly double prewar levels, according to pricing agency Argus Media.

Price rises have left some airlines, including US carriers such as United, Delta and American Airlines, with billions in extra costs because they do not have long-term hedging. Scandinavian airline SAS, which is not hedged, this week said it would cancel around 1,000 flights because of rising fuel prices. 

Disruption in the Strait of Hormuz has halted supplies from Kuwait, the world’s second-largest jet fuel exporter, which accounted for 15 per cent of global seaborne jet fuel exports in 2025, according to energy data company Vortexa.

Analysts said Europe and Australia were likely to be hit harder than other markets because of limited domestic refining capacity. Europe has shut much of its refining capacity in recent years and now sources about 40 per cent of its jet fuel through the Strait, while Australia depends heavily on refineries in China and Singapore.

Suppliers in Asia are also tightening exports of jet fuel and other refined products. China ordered a halt to refined fuel exports last week, while South Korea, another key supplier, imposed a cap on refined product exports.

Not everyone in the industry is concerned about shortages. Ryanair boss Michael O’Leary said his airline, which only serves Europe, does not expect any shortages in the next two months under current conditions.