NEW YORK (TheStreet) -- Shares of Martha Stewart Living Omnimedia (MSO) were falling 14% to $6 on heavy trading volume on Monday morning following the announcement that Sequential Brands Group (SQBG) will acquire the media and merchandising company.
Sequential brands will pay $353 million in cash and stock to acquire the company with an aggregate consideration value of $6.15 a share.
Following the transaction Martha Stewart Living will become a new vertical in Sequential Brands' platform. Martha Stewart will remain an "integral part of the brand" and will continue to serve as Chief Creative Officer.
Stewart will also become a "significant stockholder" in the company and will be nominated to serve on the board of directors after the deal closes.
The deal is expected to close in the second half of 2015.
About 1.4 million shares of Martha Stewart Living were traded by 10:10 a.m., well above the company's average trading volume of about 322,000 shares a day.
TheStreet Ratings team rates MARTHA STEWART LIVING OMNIMD as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate MARTHA STEWART LIVING OMNIMD (MSO) 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 solid stock price performance, increase in net income and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to its closing price of one year ago, MSO's share price has jumped by 41.22%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Media industry average. The net income increased by 0.7% when compared to the same quarter one year prior, going from -$2.60 million to -$2.59 million.
- The gross profit margin for MARTHA STEWART LIVING OMNIMD is rather high; currently it is at 54.33%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -15.15% is in-line with the industry average.
- Net operating cash flow has significantly decreased to $5.04 million or 72.83% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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, MARTHA STEWART LIVING OMNIMD's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: MSO Ratings Report