(The Motley Fool)OM Group, Inc. (NYSE:OMG) shares jumped 28% after the company agreed to a buyout from private equity group Apollo Global Management LLC.
So what: Apollo has agreed to pay $34 per share for OM Group, and then it will sell off the Electronic Chemicals and Photomasks businesses for $365 million. OM Group will have a go-shop period where the board of directors can actively solicit other bids that could potentially increase the value of the buyout. But theres no guarantee that a better offer exists.
Now what: Given the fact that shares are already trading near the buyout price, traders are confident that the worst-case scenario is that the current offer gets executed as planned. While there may be some upside if a new bid emerges, the premium of 28% from Fridays closing price is probably enough to scare off most potential bidders. I might take some or all shares off the table after this offer today, because I think the biggest risk is that the deal falls through, and with shares trading at nearly $34, its not worth that risk given the limited upside.
OM Group Equity Analysis
OM Group, Inc. (NYSE:OMG) opened trading today as $33.97 and is trading in the range of 32.64-34.18 today. OM Group’s current market cap stands at $1.03 billion.
Compared to other peers in the Specialty Chemicals sector, OM Group hasn’t performed in terms of quarterly revenue growth year over year at -0.05 vs. the industry average of 0.06. OM Group’s earnings per share is currently at -6.13, which is below then the sector average of 0.88.
OM Group is currently covered by 3 Wall Street analysts. The mean target price is $36.00 according to First Call. This presents a solid upside to the current price of the equity. The Mean Recommendation sits at 1.7 which is based on 2 Strong Buy and 1 Hold ratings.
The current quarter EPS consensus estimate is .23 with revenue estimates of 232.90M. Sales are expected to drop at a 21.70% rate. OM Group reported actual earnings last quarter of -0.13 which fails to beat the .05 consensus estimate, -360.00% surprise.
OM Group, Inc. operates as a technology-driven industrial company worldwide. It operates through Magnetic Technologies, Battery Technologies, and Specialty Chemicals segments. The Magnetic Technologies segment develops, manufactures, and distributes industrial-use magnetic materials, and related products and systems. This segment provides a range of magnetic technology products, from magnetically soft products to permanent magnets for sale to end markets, such as automotive systems, electrical installation technology, energy conversion and distribution, industrial, retail, and renewable energy markets. The Specialty Chemicals segment develops, produces, and supplies chemicals for electronic applications, as well as for industrial applications, including coatings, composites, and tires; and photo masks to produce semiconductors and related products. The Battery Technologies segment offers batteries, battery management systems, and battery-related research and energetic devices for defense, space, medical, and commercial markets. It serves the mobile energy storage, renewable energy, automotive systems, construction and mining, and industrial end markets. OM Group, Inc. was founded in 1991 and is headquartered in Cleveland, Ohio.