Should Carbonite Really Be Buyout Bait?

Carbonite Inc. (NASDAQ: CARB) has been a serial disappointment when you consider the multibillion valuations that Dropbox is said to have — particularly as Carbonite’s backup storage operations have been in place for years. That disappointment may now be about to end. Carbonite announced on Wednesday that it has received an unsolicited proposal from J2 Global Inc. (NASDAQ: JCOM) to acquire the company.

Carbonite said that the deal is for all the outstanding shares of Carbonite, at a price of $15.00 per share in cash. This is versus an $11.76 close and a consensus analyst price target of only $12.33. Carbonite’s new 52-week range is $8.26 to $14.89.

What stands out here is that this proposed buyout price would make almost every single investor who purchased shares since the IPO profitable. Carbonite came public in August of 2011. It priced under the mid-point of the expected pricing range at $10 per share, and the IPO raised roughly $62.5 million. Quite simply, this is one of those companies that could have grown massively — but even after the 24% or so gain the shares have a market capitalization rate of only about $390 million.

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Carbonite has fluctuated between profitability and losses, and Thomson Reuters consensus estimates are roughly breakeven for 2014 and $0.02 in earnings per share in 2015. That is only about 5% expected revenue growth to $122.6 million for 2015, followed by almost 10% revenue growth to over $134 million in 2015.

As far as how this fits into J2’s ongoing efforts, this company is worth $2.75 billion. J2 is expected to grow revenues faster than Carbonite in 2014 and 2015. J2 also is valued at only about 17 times expected 2014 earnings per share, and it is valued at only about 15 times expected 2015 earnings per share.

Carbonite said:

Consistent with its fiduciary duties and in consultation with financial and legal advisors, Carbonite’s Board of Directors will carefully review and consider the offer to determine the course of action that it believes is in the best interests of the Company and its shareholders, taking into account the Company’s current strategic plan and growth initiatives.

As part of the commitment of Carbonite’s Board and management to shareholders, the Board regularly reviews all options for generating and delivering value. Carbonite does not intend to disclose developments regarding these matters unless and until its Board determines there is a material need to update the market.

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J2 operates in two units:

  • Business Cloud Services Division offers Internet fax, virtual phone, hosted email, email marketing, online backup, unified communications and CRM solutions — under brand names eFax, eVoice, FuseMail, Campaigner, KeepItSafe, Livedrive and Onebox. It also operates a messaging network covering 49 countries on six continents.
  • Digital Media Division offers technology, gaming and lifestyle content through,,, and others. It also operates the digital ad targeting platform NetShelter Powered by BuyerBase, as well as Ziff Davis B2B.

Carbonite shares were up 24% at $14.58 after the news on Wednesday morning, while J2 shares were up 1% at $57.64.

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