 TOP IDEAS: Cash and stock takeover of Intrinsyc Technologies by Lantronix
(NASDAQ: LTRX) yields a 153% return and has future upside for shareholders.
Investorfile’s share
price accumulation target of $1.20 for Intrinsyc Technologies Corp. was reached
on March 21, 2016. For the record, we do not revise share price targets for our
Investorfile Top Ideas – Small Cap Value Stocks. We have positioned our blog to
be one of the first providers of a pragmatic perspective of a small cap company
stock's potential worth, where there may be uncovered value that has been
largely overlooked by the investment community.
In a March 2019 blog
post we suggested that M&A activity could be a stock price catalyst for
Intrinsyc Technologies during the year (See: Intrinsyc
Technologies reports record year and looks to accelerate growth).
What we did not know was that the Company itself would become the target.
On October 31st 2019, Lantronix,
Inc. (NASDAQ: LTRX) announced that it had
entered into a definitive arrangement agreement to acquire all of the outstanding
shares of Intrinsyc Technologies Corporation. Under the terms of the
arrangement agreement, Lantronix would pay Instrinsyc shareholders US$0.55 cash
per share and exchange 0.2135 of a share of the common stock of Lantronix for
each issued and outstanding share of Intrinsyc.
After
receiving the various approvals this takeover transaction has now closed. Intrinsyc Technologies
shareholders received the equivalent of about C$1.90 per share based on last
week’s date for the receipt of cash and Lantronix stock.
Intrinsyc TechnologiesCorp provides solutions that span a
product's development life cycle from concept to production. Intrinsyc services
high–tech device makers (original equipment manufacturers – OEMs) with the
ability to offer differentiated products with faster time to market. Intrinsyc
designs proprietary computer modules that become the embedded systems that
drive the dedicated functions for newhigh-tech products in markets
including the Internet of Things (IoT).
Lantronix,
Inc. describes itself as a global provider of secure data access and management
solutions for Internet of things (IoT) assets. Lantronix's mission is to be the
leading supplier of IoT solutions that enable companies to dramatically
simplify the creation, deployment and management of IoT projects while
providing secure access to data for applications and people.
Last month we had a meeting with the CEO of Lantronix, Paul Pickle. He
shared with us his vision for combining the two companies, which Investorfile
agrees has many merits, including "the realization of synergies equating to
strong earnings growth for the benefit of shareholders,” as quoted by Pickle.
Along with
synergies expected, together Intrinsyc and Lantronix become a much bigger
company which is NASDAQ listed and, therefore, in a better position to attract more
US institutional investors. With this, the stock can trade at a higher
valuation level, which is good for its shareholders in Investorfile’s opinion.
For small cap investors
who purchased and held shares of Intrinsyc Technologies since Investorfile
first recommended the stock at C$0.75 (See: Intrinsyc
Technologies: A high-tech turnaround play, for small cap value investors),
the current gain in value by owning this stock up to time of takeover by
Lantronix is about 153%.
Because a
portion of the Intrinsyc shareholder proceeds was received in Lantronix stock,
there is the potential for future upside beyond the aforementioned gain. We
note that Lantronix has issued guidance that it expects fiscal 2020 revenue
growth on the order of 25% and non-GAAP EPS growth of 35% as compared to Fiscal
2019 with the inclusion of Intrinsyc Technologies’ operations.
For the
former shareholders of Intrinsyc who now own shares in Lantronix, they may have
more upside to come on their original investment. It is like a gift that keeps on giving!
To date, Intrinsyc
Technologies represents the eighth stock from our current list of 20 Top Ideas
that has been subject to takeover or privatization at a premium.
Author’s share
ownership disclosure: LTRX – Yes
Read Disclaimer:
This
article is for informational purposes only. This article is based on the
author's independent analysis and judgment and does not guarantee the
information's accuracy or completeness. The information contained in this
article is subject to change without notice, and the author assumes no
responsibility to update the information contained in this article. The
information contained within this article should not be construed as offering
of investment advice. Those seeking direct investment advice, should consult a
qualified, registered, investment professional. This is not a direct or implied
solicitation to buy or sell securities. Readers are advised to conduct their
own due diligence prior to considering buying or selling any stock.
Investorfile.com
is not engaged in an investor relations agreement with Intrinsyc Technologies Corporation
or Lantronix, Inc. nor has it
received any compensation from Intrinsyc Technologies Corporation or Lantronix, Inc for the preparation or distribution of this
article.
The
author of this article has acquired and may trade shares of Lantronix, Inc through
open market transactions and for investment purposes only. |
