NEW YORK (TheStreet) -- Shares of GrafTech International (GTI) were gaining 2% to $5.05 on heavy trading volume Monday after Brookfield Asset Management(BAM) - Get Report announced plans to acquire the industrial electrical equipment company in a tender offer.

The asset management company will buy GrafTech for $5.05 a share, representing about a 2% premium over the company's Friday closing price.

Brookfield agreed to buy $150 million of convertible preferred shares of GrafTech in a private offering earlier in May, according to the Associated Press.

"The company believes that Brookfield has an exceptional track record sponsoring public companies in difficult underlying market conditions, including significant knowledge and experience in steel, mining and metals, and other industrial sectors," GrafTech said.

About 4.5 million shares of Graftech were traded by 11:50 a.m. Monday, above the company's average trading volume of about 1 million shares a day.

TheStreet Ratings team rates GRAFTECH INTERNATIONAL LTD as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate GRAFTECH INTERNATIONAL LTD (GTI) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Electrical Equipment industry. The net income has significantly decreased by 382.8% when compared to the same quarter one year ago, falling from -$11.52 million to -$55.61 million.
  • 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 Electrical Equipment industry and the overall market, GRAFTECH INTERNATIONAL LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for GRAFTECH INTERNATIONAL LTD is rather low; currently it is at 19.95%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -26.83% is significantly below that of the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 52.72%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 412.50% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • GRAFTECH INTERNATIONAL LTD has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GRAFTECH INTERNATIONAL LTD reported poor results of -$2.09 versus -$0.21 in the prior year. This year, the market expects an improvement in earnings (-$0.27 versus -$2.09).
  • You can view the full analysis from the report here: GTI Ratings Report