NEW YORK (TheStreet) -- Valassis Communications (VCI) was popping 21.2% to $34.30 during Wednesday's session on the news it had accepted an acquisition offer from privately-owned Hardland Clarke Holdings.
The latter, a marketing and payment solutions company, agreed to acquire all outstanding shares of Valassis for $34.04 a share, or approximately $1.84 billion. This offer is a 20.3% premium on Tuesday's close of $28.30.
In a joint press release, the companies said, "The combination of Harland Clarke Holdings Corp. and Valassis will create a leader in the transaction services, media delivery services, consumer and business direct and education solutions industries with approximately $3.3 billion in combined revenues."
Harland Clarke will finance the acquisition through its cash reserves and access additional financing through Credit Suisse, Bank of America and Citigroup. The transaction has been approved by both Boards and is expected to close in the first quarter of 2014.
TheStreet Ratings team rates Valassis Communications Inc as a Hold with a ratings score of C+. The team has this to say about their recommendation:
"We rate Valassis Communications Inc (VCI) 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 attractive valuation levels, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including poor profit margins, weak operating cash flow and deteriorating net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- VCI, with its decline in revenue, slightly underperformed the industry average of 3.1%. Since the same quarter one year prior, revenues slightly dropped by 6.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for VALASSIS COMMUNICATIONS INC is currently lower than what is desirable, coming in at 27.73%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.66% trails that of the industry average.
- Net operating cash flow has decreased to $22.40 million or 45.87% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: VCI Ratings Report