Something Set to Click at Polaroid?
Friday February 19, 1999 (08:39 am ET)
By Gene Marcial, Business Week
Shares of Polaroid Corp (PRD) have been going the wrong way in this bull market: From a 52-week high of 47 7/16 on Feb. 23, 1998, the stock tumbled to 19 on Feb. 19, 1999. Stagnant top-line growth plus an unexpected operating loss in the fourth quarter of 1998 prompted several analysts to cut their 1999 earnings estimates. With the stock so low, speculation about a merger has swirled.
Some Polaroid observers think that a hostile takeover would be difficult to pull off--but that Polaroid may be considering a merger with a deep-pocketed company that could help it turn around.
"I have heard rumblings [about a possible deal],'' says veteran Polaroid watcher Pete Enderlin, an analyst at investment firm First Albany, who concedes that mounting a raid on Polaroid would be no cakewalk: To thwart an unwelcome bid, the company has a poison pill in place. What's more, 22% of Polaroid stock is held by the company's employee stock-ownership plan. But any sign of an unwelcome bidder could push Polaroid into the arms of a friendly party, says Enderlin. About 10 years ago, Shamrock Holdings, an investor group controlled by Roy Disney, made an unsuccessful run at Polaroid.
In a deal, Polaroid could be worth as much as $40 a share, figures one strategist at a New York investment bank. Whispers are that a giant consumer- products company with tremendous marketing clout is interested in either a merger deal or in buying Polaroid outright. This investment strategist believes that, should the likes of rival Fuji Photo Film of Japan make a move to compete directly with Polaroid in the U.S.--or dare to make an unsolicited bid to buy the world's leader in instant photography--Polaroid might eventually decide to go into a marriage with a partner of its own choice.
Meanwhile, Enderlin believes that Polaroid will sell some assets in a further restructuring to streamline operations and raise cash for the new products that it has long wanted to bring to market. He thinks Polaroid could raise around $200 million if it sold more assets, including a film-manufacturing plant in New Bedford, Mass., and some real estate. Enderlin, who has an "accumulate'' rating on Polaroid, has lowered his 1999 earnings estimate from $1.56 a share to $1.48. Spokeswoman Nancy Childs declined comment on whether Polaroid is contemplating a merger.
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