Back in the early 1990s, Clayton, Dubilier, and Rice bought Lexmark International (NYSE: LXK). It was a notable deal because private equity firms were mostly hands-off with tech companies.Yet it turned out to be a strong performer for Clayton.
Interestingly enough, there's scuttlebutt that Lexmark will go private again. This is based on the analysis of Toni Sacconaghi, who is an analyst with Bernstein Research.
Crunching the numbers, Lexmark sports an enterprise-to-EBITDA ratio of about 6X or so (the shares have lost almost a third this year). This is pretty cheap when you look at other tech buyouts, such as First Data Corp (NYSE: FDC) and Alltel (NYSE: AT).
Then again, there may be a good reason for the relatively low valuation. That is, Lexmark is in a highly cyclical business (printers). In fact, it does look like information technology (IT) spending is slowing down in North America.
Also, Lexmark's licensing deals with Hewlett-Packard (NYSE: HPQ) and Canon could pose a problem. In other words, they could possibly be canceled if there is an acquisition from a strategic buyer.
In today's trading, Lexmark's shares rose 1.61% to $51.65.
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
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