In my previous post, I have posted my comments on the acquisition proposed by private equity investor Thoma Bravo for Blue Coat System (BCSI, Financial) for the total value of $1.3 billion, giving BCSI’s investor $25.81 per share. The transaction has been approved by the company’s board of directors but it needs the shareholders’ vote to go through.
In both valuation-wise and stock market-wise, it seemed to me that Thoma Bravo would get a very great deal as it can acquired BCSI at quite undervalued price. In terms of stock market swing, the company’s stock price has experienced a roller coaster for the past 10 years.
From 2002-2004, the stock had swung from as low as $1.2 to as high as $32 in just over two years' time. Then in 2006, it plunged to $6.5 after hovering in the $10-$20 range in the previous year. Then it began the next rally, pushing the stock price to $47.6 in October 2007. With the global financial recession, it experienced the free fall in 2008, coming down to around $7.5 level at the end of 2008. Nearly a year and a half later, the stock price has already climbed back to $35 per share.
It seems to me that BCSI stock price has a certain pattern that has happened for three times in just a 10-year period. And the probability that it could happen the same is not very low at all. The $25 per share level is just nearly half the peak price in 2007 and just 70% of the peak price in 2010, even with the fact that the business is delivering increasing profit and operating cash flow.
That leads us to the valuation wise of the offer. At the offer of $1.3 billion, meaning $25.81/share, it is valuing the company at 42.9x earnings, 2.4x the book and only 11.3x cash flow, whereas the valuation of fiscal 2009 gave BCSI at 120x earnings, 3.7x book and 20.7x cash flow. But as BCSI got quite liquid balance sheet with good amount of cash on hand, the enterprise value for the offer is only around $1 billion, valuing the whole company at 7.7x operating cash flows and only 8.3x free cash flows.
Within my expectation of the undervalued offer which was given to the company, the shareholder has taken action against it. Following the shareholdersfoundation.com, an investor has filed lawsuit in State Court to stop the proposed acquisition. According to the complaint the plaintiff alleges that the defendants breached the fiduciary duties and they tried to sell the company at an unfair price via an unfair process. The plaintiff alleges that the offering price has undervalued the company. In addition to the much higher price in the past, at least one analyst has set the high target price at $28 per share.
There would be no comments if the deal goes through. But if it does not, then BCSI might experience the drop in its share price, giving the investors opportunities to accumulate the undervalued shares in the good company. But it all depends on the acquisitions events and on how far the stock price would drop if the deal does not go through.
This is the subjective viewpoint of the author, and it is not the recommendation to buy, hold or sell the stocks mentioned in this analysis. Anyone who wishes to buy, hold or sell the stocks has to do his/her own analysis at his/her own risk.
Readers can support my site by shopping at Amazon. Thanks!
In both valuation-wise and stock market-wise, it seemed to me that Thoma Bravo would get a very great deal as it can acquired BCSI at quite undervalued price. In terms of stock market swing, the company’s stock price has experienced a roller coaster for the past 10 years.
From 2002-2004, the stock had swung from as low as $1.2 to as high as $32 in just over two years' time. Then in 2006, it plunged to $6.5 after hovering in the $10-$20 range in the previous year. Then it began the next rally, pushing the stock price to $47.6 in October 2007. With the global financial recession, it experienced the free fall in 2008, coming down to around $7.5 level at the end of 2008. Nearly a year and a half later, the stock price has already climbed back to $35 per share.
It seems to me that BCSI stock price has a certain pattern that has happened for three times in just a 10-year period. And the probability that it could happen the same is not very low at all. The $25 per share level is just nearly half the peak price in 2007 and just 70% of the peak price in 2010, even with the fact that the business is delivering increasing profit and operating cash flow.
That leads us to the valuation wise of the offer. At the offer of $1.3 billion, meaning $25.81/share, it is valuing the company at 42.9x earnings, 2.4x the book and only 11.3x cash flow, whereas the valuation of fiscal 2009 gave BCSI at 120x earnings, 3.7x book and 20.7x cash flow. But as BCSI got quite liquid balance sheet with good amount of cash on hand, the enterprise value for the offer is only around $1 billion, valuing the whole company at 7.7x operating cash flows and only 8.3x free cash flows.
Within my expectation of the undervalued offer which was given to the company, the shareholder has taken action against it. Following the shareholdersfoundation.com, an investor has filed lawsuit in State Court to stop the proposed acquisition. According to the complaint the plaintiff alleges that the defendants breached the fiduciary duties and they tried to sell the company at an unfair price via an unfair process. The plaintiff alleges that the offering price has undervalued the company. In addition to the much higher price in the past, at least one analyst has set the high target price at $28 per share.
There would be no comments if the deal goes through. But if it does not, then BCSI might experience the drop in its share price, giving the investors opportunities to accumulate the undervalued shares in the good company. But it all depends on the acquisitions events and on how far the stock price would drop if the deal does not go through.
This is the subjective viewpoint of the author, and it is not the recommendation to buy, hold or sell the stocks mentioned in this analysis. Anyone who wishes to buy, hold or sell the stocks has to do his/her own analysis at his/her own risk.
Readers can support my site by shopping at Amazon. Thanks!
