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Smith & Wesson Holding Corporation Message Board

  • celestialconstant celestialconstant Nov 8, 2013 8:11 PM Flag

    4:1 SWHC to RGR Merger/Buyout

    A 4 to 1 SWHC to RGR merger. Let's talk numbers. SWHC are basically throwing off similar sales and margins. So the new company should double in size as far as market cap. The RGR float would increase by 14 million. Compared to RGR's 18 million float, RGR would benefit 25%, SWHC bag holders would benefit 60%=$17-18 price target per share. EPS for the new shares would increase about 4% over RGR's current earnings or to about $5/share. The transfer gives the new shares $10 cash per share backing. RGR would have about $200 million in cash or a special dividend of about $4/ share for the new company with about 75 million left for liquidity and operations. Cute?

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    • I think there will be other investors starting to figure this out and the valuation spread between RGR and SWHC will begin to close. Shorts will get screwed in any event. Heh another pun/metaphor.... Shorts get screwed and THEN we get a " shotgun wedding" between RGR and SWHC...

    • This would work.

    • I just saw a brown eyed heifer wink at you

      4 to 1 about right considering rgr is overvalued and swhc under. So say swhc is worth 17 and Ruger worth $68. Might be more like 3.5 to 1.0

      • 1 Reply to equity_360
      • 3.5 to 1 would be a more fair valuation up front for SWHC shareholders but of no real benefit to RGR. There could be a dilution of EPS or no growth for the new company's shares. A 4:1 would be easier to sale to both party's boards and shareholders. You have to figure if management is doing their job and looking for increasing the shareholder's value the 4:1 is much better all around. Up front it appears the SWHC shareholder is getting %$#&ed. HOWEVER, staying long in the new business would mean a special dividend or stock buy back, this is assuming they'll have $200million cash at this point. This would get the valuation of 3.5:1 for SWHC owners short term with a dividend or 3.5 long term with a buy back. With RGR's 2nd qtr cc comments, with their P/E the divi would make more sense than a buyback. OR the cash could be used for another acquisition. As a side effect, the short squeeze would be happening on both sides on 30% of the floats. SWHC could see valuation as high as $20-22 before settling back to $17-18.

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