Carbonite (NASDAQ:CARB) saw J2 Global (NASDAQ:JCOM) come knocking again last week. J2 wants to buy all of CARB for $15/share. Shares of CARB are up 23% on the week and trading at a 4% discount to the buyout offer.
A couple years ago J2 tried buying for $10/share. Shares spiked, but CARB rejected the bid, and even still, shares spiked and kept moving higher - reaching $15.50 over the next year. The activist investor involved with CARB - Discovery Group - also upped its stake to 7.8% on the news. Discovery's initial activist stake of 5.9% was disclosed in February. Shares are up 23% YTD.
We covered CARB after 2Q earnings and initially highlighted CARB earlier this year, noting that CARB was overlooked and making a positive shift from targeting consumers to targeting businesses. We noted,
Carbonite's backup business is a high margin business, yielding gross margins of 66% plus, and can ultimately be a high cash flow generative business."
Its gross margin is up to 68.8%, has no debt, 18% of its market cap covered by cash and positive free cash flow. Trading at 2.6x forward EV/sales CARB still appears attractive.
The biggest near-term risk is that CARB rebuts J2's offer yet again, which I think they may well do. They just recently transitioned their business model and brought in HP's (NYSE:HPQ) Chief Strategy Officer as its new CEO, replacing its co-founder David Friend. The market is still very large and CARB is tackling a much stickier customer base (businesses versus consumers) now. We think there's more upside if CARB rebuffs.
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