FBR Capital: NTY Takeout By PE - Positive Undertones for RSH
FBR analyst says, "It was announced this AM that vitamin company NBTY (NYSE: NTY) (Not rated) is being acquired by financial sponsor The Carlyle group for a $3.8B total transaction value. This equates to 8.3x LTM EBITDA for NTY, which had $439M in gross total debt and $214M in cash as of their latest reported quarter. While clearly NTY is a different type of consumer company than RadioShack is (vitamins are considered much less cyclical than consumer electronics), we do think that the NTY deal is a favorable data point for transaction-related stocks, in general, given: 1) the 8.4x transaction valuation, and 2) the ability for the deal to attract financing. As a reminder, media reports, such as the NY Post and CNBC, have reported on RadioShack (NYSE: RSH) (Outperform-rated) as a transaction candidate, with financial sponsors cited as potential acquirers. When we have applied a 5.5x multiple in adjusted leverage to EBITDAR (with leases) in the past, we have derived roughly $25-$26 in LBO value. This would equate to a transaction multiple for RSH of 5.8x NTM EBITDA and 6.6x NTM EBITDAR, while we point out that RSH had net cash of $210M as of its latest quarter, Q110A."