Lexmark International Inc. (NYSE:LXK) confirmed it has entered into an agreement to be acquired by a consortium of investors, led by Apex Technology and PAG Asia Capital for $40.50 per share.

 

 

Shares of Lexmark closed for trading at $34.65 and were trading higher by more than 10 percent at $38.40 early Wednesday morning.

The transaction has been unanimously approved by Lexmark’s Board of Directors and is the result of a review process of strategic alternatives. The transaction implies a 30 percent premium to the stock’s closing price on October 21, 2015, the final date prior to the announcement that the company will explore strategic alternatives.

The merger is expected to close in the second half of 2016 and remains subject to approval by Lexmark’s shareholders and regulatory approvals in the U.S., including the Committee on Foreign Investment.

“This is an exciting transaction that Lexmark’s Board of Directors believes is in the best interests of our shareholders following an exhaustive strategic alternatives review process to maximize value,” said Paul Rooke, Lexmark chairman and chief executive officer. “The transaction will benefit our customers and provide new opportunities for our employees.

“As part of the Consortium, Lexmark will be able to reach the next level of growth and innovation, to the benefit of our customers, business partners and suppliers, faster than we could achieve on our own,” added Rooke. “With the Consortium’s resources, we will be able to continue to invest in and grow the business to more fully penetrate the Asia Pacific market for hardware, software and managed print services.”

Lexmark Equity Analysis

Lexmark International Inc. (NYSE:LXK) opened trading today as $37.91 and is trading in the range of 37.80-38.25 today. Lexmark’s current market cap stands at $2.37 billion.

Compared to other peers in the Computer Based Systems sector, Lexmark hasn’t performed in terms of quarterly revenue growth year over year at -0.05 vs. the industry average of 0.11.  Lexmark’s earnings per share is currently at -0.66, which is below then the sector average of 0.31.

Lexmark is currently covered by 7 Wall Street analysts.  The mean target price is $30.20 according to First Call.  This presents a solid downside to the current price of the equity.  The Mean Recommendation sits at 3.1 which is based on 6 Hold ratings.

The most recent analyst actions consisted of Credit Suisse upgrading the stock on February 18th and Standpoint Research initiating coverage with an upgrade rating back in January.

The current quarter EPS consensus estimate is .78 with revenue estimates of 839.07M.  Sales are expected to drop at a 1.90% rate.  Lexmark reported actual earnings last quarter of 1.16 which beats the 1.09 consensus estimate, a 6.40% surprise.

Corporate Profile

Lexmark International, Inc., together with its subsidiaries, operates as a developer, manufacturer, and supplier of printing, imaging, device management, managed print services (MPS), document workflow, and business process and content management solutions worldwide. It operates through two segments, Imaging Solutions and Services (ISS), and Perceptive Software. The ISS segment offers a portfolio of monochrome and color laser printers, laser multifunction products, and dot matrix printers, as well as various cartridges, service parts, and other supplies for use in the installed base of laser, inkjet, and dot matrix printers.

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