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 user 2010-04-11 at 6:01:44 pm Views: 38
  • #23442

    Company won’t comment on
    speculation,Bank of America has identified Lexington-based Lexmark
    International as a possible candidate for a leveraged buyout.

    The printer maker was one of a handful of companies listed by
    the bank’s researchers as possible targets for these types of deals,
    which involve taking on debt to help finance the acquisition.It’s
    another in a long series of rumors during the past several years of
    possible outside interest in buying Lexmark, which develops and
    manufactures laser and inkjet printers.
    lexmark logoLexmark spokesman
    Jerry Grasso said the company declines to comment on rumors and
    speculation, or on its stock.

    The company’s stock price has risen
    dramatically in recent months. In the middle of last year, the stock
    was hovering around $15 a share. On Tuesday, it closed at $36.82, up
    5.53 percent from Monday.The fact that the stock is trading at its
    52-week high makes it attractive.”These types of deals occur at market
    tops,” said Tom Carpenter, vice president and senior equity analyst at
    Hilliard Lyons in Louisville.Carpenter also noted Lexmark has
    significantly improved its printers during the past couple of years and
    focused on segments in which people print more.Lexmark also is
    attractive, he said, because of the company’s cash reserves, which are
    about $15 a share. A drawback, though, is the company’s roughly $8 a
    share of long-term debt.

    A great deal of the company’s cash is
    overseas, and that has prevented Lexmark from bringing it to the United
    States to finance continued repurchases of its stock, because the
    company would face certain taxes to bring it back. Carpenter said he
    doubts the overseas money would be a barrier to the deal because “there
    are people smart enough to find a way around that.”Carpenter said the
    biggest barrier might be deciding on a price. He said a 25 percent to 30
    percent premium on the stock price “would be a home run for
    shareholders.”He said any number of private equity firms might be
    interested in Lexmark. Private equity firms use the money invested by
    their clients to acquire stakes in other companies.Before the recession,
    the number of buyouts of publicly traded companies by private equity
    firms had risen substantially. Generally, a private equity group
    operates the company for a time, seeks to make it more efficient and
    then sells the company or parts of it for a profit. The recession slowed
    down that movement, but Bank of America analysts noted in their report
    that the deals might return and be smaller in scope, perhaps less than
    $10 billion.

    Lexmark’s market capitalization is close to $3
    Private equity firms also tend to eye companies with
    recurring revenue, which Lexmark boasts, Carpenter said. The company has
    recently announced some major deals to manage printing for large firms,
    including regional bank BB&T.”The managed print services wins are
    very important because they are predictable recurring revenue streams,
    and investors and private equity firms love recurring revenue,”
    Carpenter said.The company already has a history with private equity. It
    was initially owned by a private equity firm — Clayton, Dubilier &
    Rice Inc. — when it was spun off from IBM in 1991. The company went
    public in 1995, and the buyout firm sold its last shares in 1998.