Analysis of Real Value of Beckman Coulter in Buyout (BEC)
Beckman Coulter, Inc. (NYSE: BEC) is on fire after announcing that it is for sale. The company provides biomedical testing instrument systems, tests, and supplies for clinical laboratories worldwide. We wanted to see what it can fetch in a sale to see if investors should hang around for more or whether they should take the money and run.
Private equity firms are expected to be the buyers, although other industrial companies might have an interest. Reports are out the Beckman Coulter has hired Goldman Sachs to help it explore its options.
The shares closed at $57.09 Thursday and its market capitalization was just under $4 billion. Shares are now magically at $72.75.
2010 has been a very rough year as its summer guidance punished shares with more than a 20% loss. Its CEO also left after a five-year tenure and no real explanation was offered.
The stock is up over 27% this morning at $72.75 and shares put in a new high for 2010 today. The new 52-week range is $43.95 to $74.85.
We took a look at the stock options trading but investors will need to go out to FEB-2011 to get enough time value. The $75 CALLS are trading above $3.00, implying that shares need to be acquired for more than $78.00 for the options trade to work out.
As you saw elsewhere, this company had a monumental rise from 1990 to the early 2000s. The problem is that by 2005 shares peaked above $70.00 and the prices in the mid-$70′s acted as key resistance on the chart again in 2007, 2008, and again in 2009. Today’s move puts the stock above $70.00 for what appears to be the first time in 2010.
You never know what a buyer will pay if there is major interest or if a bidding war develops. This news today just created what some investors would call a phantom $1 billion in added share value by market capitalization alone.
If you average out the 2010 and 2011 estimates from Thomson Reuters, you get close to a $4.00 EPS target. There is also only an expected 4% revenue growth for 2011 to $3.82 billion in sales. The current share price comes to more than 18-times a blended 2010 to 2011 earnings estimate.
The most recent balance sheet as of 9/30/2010 showed more than $300 million in cash and long-term investments combined but it also comes with long-term debt of $1.33 billion and other liabilities of $533 million. The WSJ noted that this could fetch more than $5 billion in a buyout. We would caution that leaked rumors and leaked news is often a value of the enterprise with all equity AND debt rater than just equity as it is being treated today.
Analysts are cautious here on this one. Before the effects of this news, the consensus analyst target was just above $55.00 per share. The highest target was said to be $66.00 and the lowest target was $47.00.
For a company that has had problems and that has been volatile, this may be a gift at the current share price. Many investors will likely determine that today’s gains represent enough of a buyout premium to take the money and run. That may be even more so while we know 100% that the capital gains taxes are only 15% through December 31, 2010. A tax cut compromise was reached, but it is not signed and many key figures are fighting it.
Beckman Coulter could fetch a higher price depending upon who is the acquirer. Logic and common sense seems to lead to the conclusion that this big gain seen on Friday is a high enough premium already.
JON C. OGG
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