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Sturm, Ruger & Co. Inc. Message Board

  • richer_than_your_mother richer_than_your_mother May 13, 2013 8:49 PM Flag

    ATK buys Savage for $315 million

    If Savage is worth $315 million in cash, then Ruger is worth $3 Billion

    No reason to sell, start money is buying.

    Sentiment: Strong Buy

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    • One of the problems with using the Savage transaction as a benchmark for Ruger takeover value is we don't know what time period, or what assumptions, are involved in the claim that Savage was priced at 5.5x EBIDTA. Was that 2012 EBIDTA, or perhaps 2013 or 2014 EBIDTA, and what growth rate was assumed? The same problem occurs with the Ruger calculation. What earnings growth rate should we use? Maybe 50%? or maybe negative 33%, as on the Yahoo analyst consensus? And what time period should we use for EBIDTA?

      In my opinion, these are "magical numbers" that can be whatever we want to make them.

      • 1 Reply to puzzled48
      • Yeah either ATK got a deal of a lifetime or there are lots of negatives we're not aware of. It's just mildly interesting to see what that would equate to for RGR and SWHC. Clearly it would be ridiculous. I am sure that the whole picture was taken into account and not just earnings. They just gave that for some kind of idea of pay back period until the purchase would be accretive. They said it would be accretive to earnings some time in 2014.

        The article I read said it was 5.5x ttm EBITDA as of March 31, 2012. I posted a snippet quote in the other thread.

    • Savage sold about 645000 guns last year. If it made a profit of $75 per gun its profit would be well over 1/2 of Ruger's profit. At $315 million, that would call for a Ruger valuation of less than $600 million (about $30 per share).

      • 2 Replies to imarugerfan
      • Your sales information is definitely incorrect, but also I think there are other factors involved in determining how much a company would be worth, such as Assets, including cash of course, and how much debt the company has. Ruger has a Debt to Cash Ratio of 0, since they have no debt, lol. Also, the quality of its engineers, new products in the works, whether they are growing their earnings at a faster rate than the competition, and whether they are taking market share or not would be key factors as well.

      • "Savage sold about 645000 guns last year"

        The most recent data in AFMER is for 2011 (not 2012) and they made (not sold) 244,048 long guns (not 645,000):

        Rifles domestic = 219,177
        Rifles export = 11,813
        Rifles total = 230,990

        Shotguns domestic = 12,974
        Shotguns export = 84
        Shotguns total = 13,058

        Ruger made 1,162,520 guns in 2011, for comparison (828,784 handguns and 333,736 long guns).

    • Unless you are an insider at ATK or Savage, you have no basis for your statement. As a private company, Savage does not report any of its financials. You are therefore ignorant of their profits, sales, assets and liabilities. You have no basis to determine its value. Furthermore, Savage is more than a gun maker. It also owns the nations largest archery equipment maker, BowTech.

      • 1 Reply to imarugerfan
      • "You are therefore ignorant of their profits"

        Wrong. The article said that the purchase was the equivalent of 5.5 times ttm EBITDA

        "Under the terms of the transaction, ATK will pay $315 million in cash, subject to a customary working capital adjustment. This represents a trailing twelve months ended March 31, 2013 EBITDA multiple of approximately 5.5 times (unaudited). ATK believes the acquisition will be accretive to FY14 earnings per share. ATK will finance the acquisition with cash on hand and funds available under its existing credit facility."

 
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