"As a result of the stock appreciation of PFSW and the stock decline of SPDC over the past 12 months, the Ebitda multiples of both companies have now converged to a point where a combination of both companies is doable," Engine managing partner Arnaud Ajdler wrote in a letter to the boards of both companies made public on Monday. "The historical reason for not merging the companies is no longer an obstacle."
PFSweb stock has climbed from about $9 at the start of 2014 to $12.19 Tuesday morning, putting its market cap at about $190 million. Speed shares have declined from about $4.60 each at the beginning of the year to $2.99, with its total equity worth about $215 million. Both companies' valuations have settled at about 10 times Ebitda.
After restructuring by Speed, the companies have nearly identical businesses providing e-commerce services to retailers and manufacturers.
In addition to the similarities in the businesses and valuations, Engine noted, the Dallas-area companies are close enough to combine operations. They even share the same outside investor relations firm, which did not respond to requests for comment.
Engine projects that a combination would produce $12 million in savings. At a multiple of about 10 times Ebitda, the firm states that eliminating the costs would boost the combined valuations by $120 million, or 30%. When considering the opportunity to expand revenues, Engine suggested, the value could increase by more than 50%.