[Warning, this post contains discussion and speculation of an explicit nature concerning the HAS/Tiger merger and its implications for Radica]
I wanted to speculate a bit more as to what the price of the HAS/Tiger buyout might mean for an eventual buyout of Radica. We already know that on a price/sales basis, the Tiger deal was cheap, and therefore doesn't look so good for Radica. But what about on a price/earnings basis? I tracked down a report by Gary Jacobson, the toy analyst of Jefferies & Co, which was issued after the HAS/Tiger news. He is projecting that Tiger will add $0.10/share to HAS net income, which I will assume he was guided to by HAS management based on Tiger's past profits. If you add back another $0.075/share to account for the decrease in interest earnings (after-tax) on the $335 million HAS is paying, you get $0.175/share for Tiger's past earnings. If you multiply by outstanding HAS shares of 134.1 million, you get an imputed $23.5 million in net income (on $400 million of sales), which suggests that the $335 million buyout price was 14.25x Tiger's past earnings.
RADAF, by contrast, had $29.6 million in net income on sales of $88 million last fiscal year. Applying the 14.25x Tiger multiple to RADAF's past 12 months earnings of $1.36/share gives you a price of $19.38/share. Much better than the price/sales ratio comparison, which values RADAF at $3.33/share, but only a slight premium to the current price. If RADAF can earn $3/share this year, then a similar buyout multiple a year from now results in a price of $42.75/share. So if RADAF delivers great earnings this year, the potential buyout price goes way up, yet at a 14.25x multiple, it would still be accretive to the earnings of either HAS or MAT.
Needless to say, I have made quite a few assumptions in the above, many of which may be wrong, so view this as speculation with a few facts mixed in.
Dennis |
