Rogers falls amid note about potential price cut for DuPont sale
Sundry Photography
Rogers' (NYSE:ROG) dropped 2.1% amid a sell-side note that speculated about a potential price cut with its planned sale to Dupont (NYSE:DD) if the deal were to hit the Nov. 1 termination date as China antitrust approval is still pending.
Barclays sees a "high probability" that the $5.2 billion deal gets done, though ROG/DD is a unique deal where a "renegotiated lower price" scenario may be amenable to both parties," Barclays analyst Michael Leithead wrote in a note on Sunday.
"We think management still wants the business, but at a lower price if they could legally/mechanically do so," Leithead, who has an equal weight rating on DuPont (DD) and price target of $64.
DuPont (DD) likely "very much" still wants the Rogers (ROG) business, though the value of the transaction has "changed considerably" over the past 10 months since it was announced. While the deal was originally valued at ~19x 2022 estimated EBITDA of ~$270M, the value today appears to be closer to ~28x EBITDA of ~$185 million, according to Leithead.
Rogers (ROG) standalone value if no deal with DuPont (DD) were to happen is around $200/share, about 20% downside from current levels, Leithead wrote.
Leithead said on a "relative basis" that he believes that it would actually be better for DuPont (DD) to use cash to repurchase shares rather than complete the Rogers (ROG) deal.
Barclays isn't the first sell side shop to opine on a possible price cut as the deal continues to be hurt by delayed China antitrust review. Earlier this month BMO analyst John McNulty wrote that he sees a possible cut if the deal isn't done by the Nov. 1 walk date, especially as it appears the business is "clearly running under" managements' estimates for $270 million in 2022 EBITDA.
Earlier this month, a report circulated that the antitrust review process by China's State Administration for Market Regulation appeared to be moving along and engagement may start soon.
Last month a Stifel analyst predicted that the deal would still be consummated.