Is HGG Next Buyout Candidate?

Written by GSCR Staff   
Monday, 06 August 2012 08:42

Early this morning it was announced that the former founder of Best Buy (NYSE – BBY) has offered to buy the struggling retailer for $24-26 per share, which would value the Company at over $8 billion. The $229M market cap hhgregg (NYSE – HGG - $6.30) isn’t exactly setting the world on fire and is not a real analyst favorite. Still, it has increased sales in recent quarters and anticipates that EPS for fiscal 2013 ending in March will be between $0.90 - $1.05 per share, with total revenue well over $2.6 billion.  With the stock in the low-mid $6.00 range, and with no debt, the valuation is comparable to other electronic retailers.

Is HGG the next buyout candidate? We have seen a number of retail firms go private in recent months and the risk here seems to be in the camp of investors. Time will tell but the stock should rally today on the BBY news.  There is a pretty decent sized short position, with 48% of the float short, so even a small rally could prompt some covering.  Even without a buyout, the valuation is attractive, if management hits their targets.

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