Safeguard Scientific draws Wall Street interest
CEO says deal climate is the 'healthiest it's been in awhile'
PrintE-mailDisable live quotesRSSDigg itDel.icio.usBy Steve Gelsi, MarketWatch
Last Update: 3:49 PM ET Mar 8, 2007
NEW YORK (MarketWatch) -- Back in the pre-2001 boom, Internet Capital, CMGI, and Safeguard Scientifics drew billions in backing as holding companies for coveted Internet startups.
Fast forward past the 2001-2004 bear market and Safeguard Scientifics (SFE : Safeguard Scientifics, Inc still remains as its competes for investors against venture capital and private equity firms as an expert in growing information technology and life sciences firms.
CEO Peter J. Boni said his company offers investors more transparency, tax advantages when selling firms, and flexibility than its rivals.
"If you invest in venture capital or private equity firms, you have two choices -- you can put in a lot of money or put in more," Boni said in a telephone interview with MarketWatch. "Here you can put in a little or a lot. You're immediately liquid if you want to sell your shares."
Safeguard Scientifics isn't forced to divest its holdings prematurely as private equity firms and venture capitalists sometimes do in order to pay back stakeholders when funds mature, he said.
In a sign that Wall Street is starting to pay attention, Monness, Crespi, Hardt & Co. initiated coverage of the company Feb. 26 with a buy rating and target price of $4.50.
CJS Securities' Bob Labick began its research of the firm with a buy rating on Oct. 11; Susquehanna Financial and Boenning & Scattergood Inc. also provide analyst coverage.
'The deal climate is the healthiest it's been for a while. Our business model as a holding company is to put capital, to work for growth in technology and life sciences. We'll do a combination of buyout and corporate spinout or selective mergers and acquisitions, as well as growth financing. We've ignited our deal machinery.'
— Peter J. Boni, Safeguard Scientifics
Over the past two years, Safeguard Scientifics shares have risen to nearly $3 a share from $1.50, with a current market cap of about $350 million.
While Safeguard gained much visibility during the dot-com craze of 2000, Boni emphasized that the company's roots going back several decades encouraged his decision to take the CEO job 18 months ago.
Boni had previously served in a variety of high ranking jobs in finance and technology including operating partner of private equity firm Advent International and CEO of Prime Response and Cayenne Software.
"Here's a company with a rich and colorful history, it's been around for 50 years," he said. "They have a great track record of providing growth capital to entrepreneurs."
He credits his predecessor at the company, Anthony L. Craig, with doing "a lot of heavy lifting" to trim down the company's holdings from about 40 companies down to 15 companies, add about $200 million to its balance sheet, and pave the way for growth.
"The deal climate is the healthiest it's been for a while," he said. "Our business model as a holding company is to put capital, to work for growth in technology and life sciences. We'll do a combination of buyout and corporate spinout or selective mergers and acquisitions, as well as growth financing. We've ignited our deal machinery."
On Thursday, the company reported fourth-quarter net income of $71.3 million on revenue of $53.3 million, compared to net income of $2.3 million and revenue of $41 million in the year-ago period. The period marked the fifth consecutive quarter of double-digit revenue growth for the company. Results were buoyed by two exit transaction during the quarter.
In a related move, Clarient (CLRT :
a Safeguard Scientifics partner company, on Thursday said it sold its Acis and Trestle Instrument Systems units to Carl Zeiss MicroImaging, Inc. for up to $12.5 million.
In another recent deal, Traffic.com (TRFC : traffic com inc
a Safeguard firm, held an initial public offering in January.
Safeguard Scientifics said about 90% of venture exits are through mergers or acquisition and only 10% through initial public offerings, but the company sees a "modest uptick" in the new issues market, compared to the trough after the bubble.
Looking ahead, Boni said he'll work to get Wall Street to value the company based on its net asset value, a different metric than the usual net income or cash flow numbers that analysts seek out.
"It takes analysis of our balance sheet to convert carrying value to market value," he said. "Analysts have been doing some work to do the calculations. We believe we have a highly valued enterprise whose net asset value is cloaked by accounting convention."
Steve Gelsi is a reporter for MarketWatch in New York. |
