Southeastern Asset Management, the investment firm founded by Mason Hawkins (Trades, Portfolio) in 1975, disclosed earlier this week it established a stake in Westrock Coffee Co. (WEST, Financial) following its public debut.
To achieve long-term capital growth, the Memphis, Tennessee-based firm, which manages the Longleaf Partners Funds, invests in a somewhat concentrated number of undervalued companies that have strong balance sheets and good management teams.
According to GuruFocus Real-Time Picks, a Premium feature based on 13D, 13G and Form 4 filings, the firm invested in 8.01 million shares of the Little Rock, Arkansas-based consumer packaged goods company on Aug. 31, allocating 1.82% of the equity portfolio to the holding. The stock traded for an average price of $10.99 per share on the day of the transaction.
With a 10.97% stake, Hawkins’ firm is currently the only guru invested in the company.
About Westrock Coffee
Founded in 2009, Westrock provides ethically sourced coffee, tea, extracts and other ingredients to its customers in the retail, foodservice, consumer packaged goods, non-commercial and other hospitality-focused industries around the world. It also provides services like product development, roasting, packaging and distribution. The company sources its coffee and tea from 35 countries, where it supports local farmers and their families.
The company has a $752.25 million market cap; its shares were trading around $10.34 on Wednesday with a price-book ratio of 8.80 and a price-sales ratio of 1.89.
Since going public via a combination with special purpose acquisition company Riverview Acquisition Corp. (RVAC, Financial) on Aug. 29, the stock has fallen nearly 10%.
SPAC merger and public debut
Westrock announced its intention to go public back in April. At the time, the combination with Riverview was expected to give the coffee company an enterprise value of approximately $1.08 billion at $10 per share.
Shareholders of Riverview voted to approve the transaction on Aug. 25.
Following the close of the deal four days later, Westrock Coffee co-founder and CEO Scott Ford commented on the “truly momentous day” in the company’s history.
“Accessing the public markets is not only validation of the efforts of our incredible team but will also enable us to expedite our growth in the U.S. and internationally, while capitalizing on the generational shifts in consumer preferences,” he said. “I am confident in Westrock Coffee’s future and proud of the team that has led us to this important moment.”
Ford and the rest of the management team will continue to lead the company, though Riverview Chairman and CEO R. Brad Martin will join its board.
In a statement, Martin expressed his “great admiration” of Westrock Coffee’s leadership.
“The Westrock Coffee team is passionate in its commitment to its farmer partners, customers, and shareholders,” he said. “Westrock Coffee is exactly the type of enterprise which should be in the public markets, and I’m delighted that Riverview could help accomplish that objective. I look forward to working with the Westrock Coffee team in the months ahead.”
The company also revealed it entered into a new credit agreement, which includes a $175 million senior secured first lien term loan facility as well as a $175 million senior secured first lien revolving credit facility.
Financials
Westrock reported its second-quarter financial results on Aug. 18.
For the three months ended June 30, the company posted a net loss of $5.8 million, which shrunk 4% from the prior-year quarter. Similarly, revenue grew 31% to $223.4 million.
Westrock’s adjusted Ebitda also grew 19% from a year ago to $13.3 million.
GuruFocus rated the company’s financial strength 3 out of 10 and its profitability 4 out of 10.
Portfolio composition and performance
Southeastern’s $4.74 billion equity portfolio, which the 13F filing noted was made up of 37 stocks as of June 30, is most heavily invested in the communication services, consumer cyclical and financial services sectors.
The firm’s largest holdings as of the end of the second quarter were Lumen Technologies Inc. (LUMN, Financial), Mattel Inc. (MAT, Financial), FedEx Corp. (FDX, Financial), CNX Resources Corp. (CNX, Financial), IAC Inc. (IAC, Financial), Hyatt Hotels Corp. (H, Financial), General Electric Co. (GE, Financial), Affiliated Managers Group Inc. (AMG, Financial), Warner Bros. Discovery Inc. (WBD, Financial) and Lazard Ltd. (LAZ, Financial).
Hawkins’ firm returned 23.58% in 2021, underperforming the S&P 500’s 28.7% return.
Investors should be aware that 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
