Radio Shack (RSH) For Sale? Cost Could Be Too High
The New York Post, not the single most reliable source for business news, says Radio Shack (RSH) is looking for a private equity buyer or an M&A transaction with a larger company like Best Buy (BBY). The paper reports that…
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Radio Shack is too expensive to be a private equity target. The firm’s shares trade at $21.80, a two-year high. That gives the company a market cap of $2.7 billion. Any buyer which offered even a modest premium would have to agree to a purchase price in excess of $3.5 billion.
Radio Shack’s 10-K shows that it only made $205 million on $4.3 billion in sales in 2009. It may be hard to find a buyer willing to pay seventeen times net income, even though the company does have a reasonably strong balance sheet.
The rumors about the sale of Radio Shack are almost certainly nothing more than rumors which have become a larger and larger part of the Wall Street M&A game. Recently Palm (PALM), Sprint (S), and GameStop (GME) have been on the market, or so the press has reported. None of the companies entered into a transaction and it is likely that none of them seriously considered a buyout.
The Radio Shack rumor may last a day or two, but no one will buy a company that is only modestly successful.
Douglas A. McIntyre
Contact [email protected] for any questions or corrections.
Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.
A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.
