DesjardinsNote that despite their comments, they also had a $4.00 target. GLTA
Photon Control Inc.’s deal to be acquired by by Massachusetts-based MKS Instruments Inc. appears to be “fair” according to, said Desjardins Securities analyst Kevin Krishnaratne.
Shares of the Richmond, B.C.-based manufacturer of optical sensors jumped 16.7 per cent on Monday following the announcement of the all-cash transactionvalued atapproximately$387-million.
Calling the deal “attractive and a win for investors who have held the name since the end of the last semi cycle in late 2018 (4 times return since),” Mr. Krishnaratne moved Photon to “tender” from a “buy” recommendation, pointing to its valuation versus peers and its historical trading range.
“MKSI a logical acquirer, in our view,” he said. “MKSI has noted that PHO is poised to enhance its strategic objectives, particularly related to its ability to increase sensor sales for temperature control for etch/deposition applications. We see many natural synergies between the two given a similar customer base (top WFE equipment vendors) and the ability for PHO to expand sales and accelerate product development as a combined entity. While it is possible a higher bid may materialize from another strategic buyer or perhaps even PE, we see the likelihood as relatively low given the strong fit between PHO and MKSI. If PHO were to accept a superior offer, MKSI has the right to match ($15.5-million termination fee paid to PHO if MKSI declines). While the deal looks reasonable, we expect some may be disappointed given the momentum in PHO’s business of late, which was partly reflected in our prior target. However, given PHO is quite widely held with few large shareholders, and absent any funds taking a more active position, we see the deal likely receiving the required 66.7-per-cent vote approval and closing in 3Q.”
He moved his target to $3.60 to reflect the deal from $4 previously. The average is $3.92.
“While we were excited for the potential upside in PHO and its shares over the coming years given the strong semiconductor tailwinds, its leadership position in sensor technology, solid operating profile and potential for new areas of growth via M&A, we see the offer as reasonably fair despite being below our prior $4.00 target,” Mr. Krishnaratne said.