NEW YORK (TheStreet) -- Shares of Procera Networks (PKT) were gaining 20.3% to $11.44 on heavy trading volume Wednesday following the announcement that private equity firm Francisco Partners Management will acquire the business software company for about $240 million.
Francisco Partners will pay $11.50 a share in cash to Procera Networks. The all-cash deal represents a 21% premium over Procera's closing price on Tuesday.
The transaction is expected to close sometime in June. Procera will be a privately held company after the transaction closes.
"As part of Francisco Partners' portfolio of companies, Procera will have the resources and financial expertise needed to attain the next level of growth and to strengthen our competitive market position," Procera President and CEO James Brear said in a statement.
About 3.8 million shares of Procera were traded by 9:39 a.m. Wednesday, well above the company's average trading volume of about 193,000 shares a day.
TheStreet Ratings team rates PROCERA NETWORKS INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate PROCERA NETWORKS INC (PKT) 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. Among the areas we feel are negative, one of the most important has been an overall disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Communications Equipment industry and the overall market, PROCERA NETWORKS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- In its most recent trading session, PKT has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
- The gross profit margin for PROCERA NETWORKS INC is rather high; currently it is at 61.05%. Regardless of PKT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PKT's net profit margin of -7.12% significantly underperformed when compared to the industry average.
- PROCERA NETWORKS INC reported significant earnings per share improvement 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, PROCERA NETWORKS INC reported poor results of -$1.21 versus -$0.81 in the prior year. This year, the market expects an improvement in earnings (-$0.04 versus -$1.21).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 47.9% when compared to the same quarter one year prior, rising from -$3.30 million to -$1.72 million.
- You can view the full analysis from the report here: PKT Ratings Report