NEW YORK (TheStreet) -- SFX Entertainment (SFXE) shares are up 22.82% to $5.06 in trading on Tuesday after the New York City-based concert promoter agreed to be taken private by CEO Robert Sillerman who offered to purchase the 62.6% of outstanding shares that he does not already own.

Sillerman will pay $5.25 per share in cash in a deal that values the company at approximately $490 million.

The company's board agreed to the deal with conditions including a 45 day "go shop" period where the company will actively solicit competing takeover bids with any successful competing bidder being on the hook for a $7.8 million Sillerman bid termination fee.

Sillerman agreed to vote his shares for a competing bid if it exceeds his final offer by more than 2.5%.

SFX Entertainment went public in October 2013, debuting at $13 per share.

TheStreet Ratings team rates SFX ENTERTAINMENT INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

"We rate SFX ENTERTAINMENT INC (SFXE) a SELL. This is driven by a number of negative factors, 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 disappointing return on equity, weak operating cash flow, poor profit margins, generally disappointing historical performance in the stock itself and generally high debt management risk."

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 Media industry and the overall market, SFX ENTERTAINMENT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to -$10.58 million or 31.76% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The gross profit margin for SFX ENTERTAINMENT INC is currently lower than what is desirable, coming in at 34.54%. Regardless of SFXE's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SFXE's net profit margin of -79.59% significantly underperformed when compared to the industry average.
  • Despite the current debt-to-equity ratio of 1.52, it is still below the industry average, suggesting that this level of debt is acceptable within the Media industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.40 is very low and demonstrates very weak liquidity.
  • SFXE's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 41.57%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • You can view the full analysis from the report here: SFXE Ratings Report