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Aeroflex Holdings' (ARX) $254mm IPO - with a market cap of $1.2bb at price range mid-point of $14.50 - is scheduled for Friday, November 19, 2010

Conclusion
Aeroflex is overpriced because:

  • It has a long track record of losing money.
  • For the fiscal year ended June 30, 2010 interest payments were 30% more than operating earnings.
  • Percent of revenue: 13 % interest payments, 10% operating earnings.
  • Tangible book value is a negative $450mm.
  • Can’t pay dividends because of restrictive debt covenants.

Business
Global provider of radio frequency, or RF, and microwave integrated circuits, components and systems.

Dividend Policy
Amounts available to pay cash dividends are restricted by subsidiaries' debt agreements.

Competitors
AMS primarily competes with large defense-related technology providers, including BAE Systems (OTCPK:BAESY) and Honeywell (HON). In addition, AMS competes with a number of specialty semiconductor providers, including Actel (OTCQB:ACTL), Hittite Microwave Corporation (HITT), ILC/Data Devices Corporation and Microsemi (MSCC).
ATS also competes with Agilent (A) and a number of specialty test and measurement providers, including Anite, Anritsu, Rohde & Schwarz and Spirent (OTCPK:SPMYY).

Use of Proceeds
$228mm:

  • $204mm to repay debt & fees
  • $17mm to sponsors
  • $7mm for general corporate purposes

ARX Valuation Metrics

Disclosure: none

Source: Five Reasons Aeroflex's IPO Is Overpriced