Shares of Bio-Rad Laboratories (BIO) rose 11% Tuesday on some sad news. Its 88-year old Chairman David Schwartz has passed away.
The producer of medical screening and research equipment rose the most in three years after the death of Mr. Schwartz which might leave the family company open to a potential sale.
David Schwartz, the Chairman of Bio-Rad who founded the company in 1952 died over the weekend. Schwartz has always been considered by analysts as opposed to selling his company. Although he and his wife hold about a third of common shares and two thirds of voting shares, the company might be "in play" as a result of his death.
Schwartz' son Norman became CEO of Bio-Rad in 2003 and is much more open to a potential deal than his father, according to commentators.
Long term investors are probably better of if the company stays in the family's hands. It has a great culture which has contributed a lot to its success and family control will most likely preserve and nurture that culture. A friendly or potential hostile bid has never been in question with the Schwartz family so tight in control over the last years.
Extended distribution agreement
Bio-Rad furthermore announced that it had extended its global sales and distribution agreement with Luminex to 2023. While the news is obviously welcomed by investors, it is not the reason behind the move.
Bio-Rad holds approximately $800 million in cash and equivalents according to its latest quarterly filing. It has roughly $700 million in debt, leaving the firm with a net cash position of $100 million.
Valued at $3.2 billion, the firm's operating assets are valued at $3.1 billion which implies a 1.5 times revenue multiple and valuation of 17 times annual earnings. This seems reasonable given the high single-digit revenue growth and high net margins, which the company reported over the last years. At the moment, the firm pays no dividends.
Irrespective of whether the company is in play given the sad news, it offers great prospects for long term investors. Steady growth in a long term growth industry with solid margins offer value for long term investors who have seen a 200% return over the last decade alone.
While "fast money" wants to sell the company to a potential bidder for a quick buck, long term investors should applaud a decision to remain private in an attempt to preserve the company's culture and "guarantees" for long term returns.