CIR - KKR deal price for Circor still undervalues the valve maker - analyst

2023-06-30 15:57:15 ET

KKR's ( NYSE: KKR ) revised deal to buy Circor ( NYSE: CIR ) for $56 a share following a competing offer from Arcline for $57 still appears to undervalue the company on a sum-of-the-parts basis, according to a Stifel analyst.

"In our view, even the current offers modestly undervalue CIR shares on a sum of the parts basis which could trade in the low-to-mid teens on a sum of the parts basis to peers, and still offers the acquiring firm the potential for solid ROI given the margin expansion opportunities and exit strategies involving splitting the company up and selling to strategic acquirers down the road," Stifel analyst Nathan Jones wrote in a note on Friday.

KKR's current offer values Circor ( CIR ) at 11.9x 2023 est. EBIRDA, while Arcline values it at 12.0x 2023 est. EBITDA, according to Jones. Stifel raised its price target to $56 from $51 and has a hold rating on CIR shares.

Circor ( CIR ) shares traded up almost 5% to $56.40, trading through the deal price, in a sign that some investors believe that bidder Arcline could come in with a higher offer. KKR's bid also has a ticking fee of a $1 if the deal isn't completed by Oct. 31.

Arcline Investment Management submitted a $57/share takeover proposal on Wednesday, but Circor's ( CIR ) board concluded the difference in price was more than offset by the increased deal certainty associated with KKR's amended agreement.

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