Electro Rent Corporation (NASDAQ:ELRC) shares were up 18.65% to $15.46 on Friday, thanks to a higher purchase price offer from Platinum Equity. The company previously offered to buy Electro Rent at $13.12 per share then increased its offer to $15.50 per share in cash for a total of $382.2 million compared to the previous offer at $323.4 million.
With this proposal, Steven Markheim and Allen Sciarillo will retain their current roles under ownership of Platinum Equity, which is an American private equity investment firm founded in 1995. It focuses on leveraged buyout investments of established companies in the U.S. and Europe.
This new purchase price represents a 19% premium over the closing price on June 23 and 45% higher than the company’s average stock price for the past three months. According to a press release, this increase was made after Electro Rent Corporation received an unsolicited third party acquisition proposal.
The company has a market cap of $443.82 million at 24.20 million shares outstanding. Shares were trading in a 52-week range of $7.30 to $15.48, indicating that there’s significant upside momentum affecting stock prices after this announcement.
Earlier in the month, reports suggested that the previous deal may not be in the best interests of shareholders. At least one analyst from WeissLaw LLP noted that the target price should be at least $15.00 per share, nearly $2.00 higher than the initial offer price. The new offer of $15.50 per share is still under investigation, pending shareholder and regulatory approval as well.
Electro Rent Corporation is engaged in the rental, lease and sale of new and used electronic test and measurement equipment. Its Data Products division offers personal computers from manufacturers, including the likes of Dell, Hewlett-Packard (HP), International Business Machines (IBM), Toshiba and Apple. In addition, its customers rent, lease and buy its T&M equipment, and use that equipment primarily in the aerospace and defense, telecommunications, electronics, industrial and semiconductor markets.
DISCLAIMER: There is a substantial risk of loss with any speculative asset, especially small cap stocks. The opinions expressed are those of the author, and do not constitute recommendations to buy or sell a stock. Do your own research before committing capital.