The roughly $600 million merger announced today between BrightPoint (NASDAQ:CELL) and privately held Dangaard Telecom should help Brightpoint mitigate the effects of a cell phone market in the U.S. that is seeing consolidation of wireless operators, says Cowen & Co.’s Matthew Hoffman.
Brightpoint, which helps sell cell phones (say that three times fast), gets to expand its sales to Spain and Germany, among other countries, by assuming $300 million of debt held by Dangaard, Europe’s largest cell phone distributor, and giving the company over $300 million worth of Brightpoint shares. Says Hoffman:
Brightpoint will enjoy a unique dealer footprint and class-leading ability to move phones on three continents. That scale should improve access and terms the combined entity receives from handset OEMs. Few, if any mobile phone distributors, will be able to match Brightpoint’s reach and extensive dealer base upon the close of the transaction. By adding significant reach into Spain, Germany and Denmark, Brightpoint’s exposure to the consolidating carrier base in N. America will be more limited.
Hoffman has a Neutral rating on Brightpoint shares and says the major risk to the stock is that with less cash on hand as a result of the deal, the company’s PE multiple — 15x this year’s projected 68 cents in profit per share — could contract if the global handset market doesn’t cooperate.
Brightpoint investors are liking the deal today, however, with the shares up over 9% at $11.21.
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