Are Analogic Shareholders Getting Enough in the Buyout?

Health and Healthcare

Published: April 11, 2018 10:35 am

Last Updated: January 12, 2020 1:32 am

Analogic Corp. (NASDAQ: ALOG) shares took a big step back on Wednesday after the firm announced that it would be acquired. Usually, when companies are being acquired they receive a premium on their share price. This does not seem to be the case for Analogic. But is this fair for shareholders?

Under the terms of the deal, Analogic will be acquired by Altaris for $84 per share in cash, or roughly $1.1 billion in total. The transaction and the merger agreement were unanimously approved by Analogic’s board of directors, and the board unanimously recommends that Analogic’s stockholders vote in favor of the transaction.

The transaction represents a 25% premium to the closing share price of $67.45 on June 7, 2017, the day after Analogic reported quarterly earnings for the third quarter of fiscal 2017 and announced the launch of its strategic review process.

However, looking at the chart, the numbers look a little different. Compared to the 50-day moving average ($88.39), this acquisition price represents a discount of 5.0%. On the other hand, the price represents a premium of 4%, compared to the 200-day moving average ($80.78).

Looking back over the past five years, the stock has traded between $75 and $90 most of the time. Considering this, the $84 price level seems reasonable with a minimal premium.

Bernard Bailey, the Analogic board chair, commented:

The Board has always sought to maximize stockholder value. Given the increasingly competitive markets that we serve, we have been focused on the need to achieve greater scale in order to generate sustained profitable growth. As a result, the Board initiated a review of strategic alternatives available to Analogic. This 10-month, comprehensive process resulted in today’s transaction with Altaris that provides stockholders with immediate, substantial, and certain cash value. The Board strongly believes that a transaction with a buyer with strategic assets like Altaris provides maximum value for and is in the best interest of Analogic stockholders.

Shares of Analogic were last seen down 13.3% at $83.25, with a consensus analyst price target of $87.50 and a 52-week trading range of $66.00 to $101.80.