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AnonymousInactivehttp://www.kentucky.com/2010/03/24/1194557/lexmark-eyed-as-takeover-candidate.html
LEXMARK EYED AS A TAKEOVER CANDIDATE
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
billion.
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. -
AuthorApril 11, 2010 at 6:01 PM
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