MK Comprehensive Special Situations Report — 2026-04-23

MEMORANDUM

TO: Valued Institutional Investors FROM: Chief Investment Officer, Marlowe Keynes Capital DATE: October 27, 2023 SUBJECT: Weekly Special Situations Report – Executive Overview

Dear Investors,

This week’s executive overview provides an assessment of the special situations landscape, drawing insights from our portfolio of 45 active situations, comprising 12 Merger Arbitrage, 31 Spinoff, and 2 Carve Out opportunities.

1. MARKET ENVIRONMENT

The current macro backdrop remains remarkably supportive for special situations strategies. Equity markets, as evidenced by the S&P 500 and Nasdaq’s robust performance, signal underlying investor confidence, albeit with elevated valuations. Crucially, volatility, measured by the VIX and FRED VIX, continues to be subdued, fostering a stable environment conducive to deal completion and strategic corporate actions.

Fixed income markets present a "normal" yield curve, with the 10 Year Treasury at 4.30% and a positive 10Y 2Y spread of 0.51%, suggesting a healthy economic outlook. The Fed Funds Rate at 3.64% indicates a relatively accommodative monetary policy, which, combined with exceptionally tight credit spreads – High Yield OAS at 2.84% and BBB Corporate at 0.99% – underscores a "LOOSE" financial environment. The Chicago Fed Financial Conditions Index at negative 0.497 further reinforces this, facilitating readily available and affordable capital for corporate restructuring, M&A, and spinoffs.

While inflation remains a consideration, the market’s reaction, particularly the "normal" yield curve, suggests an expectation of its controlled trajectory. The strong US Dollar Index at 118.0795, however, warrants careful consideration for cross border transactions and the valuation of international assets. Overall, the confluence of stable equities, low volatility, and benign credit conditions creates a fertile ground for value realization through special situations.

2. KEY THEMES

Across our tracked situations, two prominent themes are emerging:

• Deleveraging and Focus through Corporate Simplification: A significant portion of our spinoff and carve out opportunities, such as the Atlantis Sanya spinoff from Fosun International (FOSUF) and the proposed Peplink Holdings Spinoff from Plover Bay Technologies (PBTDF), are driven by parent companies seeking to deleverage balance sheets, unlock hidden value, and sharpen strategic focus. This trend is particularly prevalent in conglomerates or diversified holdings, where market valuations often fail to reflect the sum of their parts. The current low cost of capital facilitates these separations, allowing divested entities to access independent financing more efficiently.
• Strategic Repositioning in Maturing Industries: We observe several situations, including International Paper’s (IP) strategic review and the New York Knicks spinoff from MSGS, where companies in established or maturing sectors are undertaking significant structural changes to adapt to evolving market dynamics. This often involves divesting non core assets, optimizing capital allocation, or separating distinct business lines to better compete and attract specialized investor bases. These actions aim to enhance operational efficiency and drive long term shareholder value in environments demanding greater agility.

3. TOP DEVELOPMENTS

In the past several weeks, the following developments have been most significant:

• Fosun International (FOSUF) – Atlantis Sanya Spinoff: The comprehensive analysis of this spinoff highlights a clear strategy to unlock value from a non core hospitality asset. The market’s reception to similar asset light strategies suggests potential for significant upside post separation, contingent on the clarity of the new entity’s capital structure and growth plan.
• International Paper (IP) – Strategic Review: The ongoing strategic review at IP, a key player in the paper and packaging industry, signals a potential for significant portfolio optimization. While specific actions remain to be announced, such reviews often precede divestitures or spinoffs designed to enhance focus and return capital to shareholders.
• Plover Bay Technologies (PBTDF) – Peplink Holdings Spinoff: This proposed spinoff illustrates the trend of separating high growth technology assets from more traditional operations. The market often assigns a higher multiple to pure play technology companies, making this an attractive proposition for value creation.
• Madison Square Garden Sports Corp. (MSGS) – New York Knicks Spinoff: The announced spinoff of the Knicks represents a move to separate highly valuable, yet distinct, sports assets from broader entertainment holdings. This is a classic example of unlocking value by allowing investors to directly own a specific, often trophy, asset.

4. OUTLOOK

Looking ahead, we anticipate continued activity in corporate simplification and strategic reposition