RealD (RLD) Stock Gains on Sale to Rizvi Traverse
NEW YORK (TheStreet) -- Shares of RealD (RLD) were gaining 2.5% to $10.83 on Monday following the announcement that private equity firm Rizvi Traverse Management will acquire the visual technology company in a deal valued at about $551 million.
Rizvi Traverse will pay $11 a share in cash to acquire all outstanding shares of RealD. The offer represents a 19% premium over the company's closing price on October 1, the day before StarboardValue indicated it was interested in acquiring RealD.
"I am excited about the future of RealD, where in partnership with Rizvi Traverse, we can continue to maximize the value inherent in RealD's cinema platform and leading IP portfolio," RealD Chairman and CEO Michael V. Lewis said in a statement. "As a private company, RealD will have the flexibility and resources to further invest in our continued cinema leadership and visual technology innovation."
Lewis will reinvest his equity into the transaction, and agreed to vote in favor of the merger, in connection with the merger agreement. Lewis will continue serving as RealD's chairman and CEO following the acquisition.
About 2.5 million shares of RealD were traded by 11:42 a.m. Monday, well above the company's average trading volume of about 189,000 shares a day.
TheStreet Ratings team rates REALD INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
We rate REALD INC (RLD) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Electronic Equipment, Instruments & Components industry average. The net income increased by 23.5% when compared to the same quarter one year prior, going from $5.93 million to $7.32 million.
- RLD's debt-to-equity ratio is very low at 0.25 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, RLD has a quick ratio of 2.09, which demonstrates the ability of the company to cover short-term liquidity needs.
- REALD INC has improved earnings per share by 27.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, REALD INC reported poor results of -$0.50 versus -$0.23 in the prior year. This year, the market expects an improvement in earnings ($0.00 versus -$0.50).
- Net operating cash flow has significantly decreased to -$4.31 million or 204.99% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, REALD INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: RLD
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.