Analyst Sees Penton as Acquisition Target
By Margo McCall -- Tradeshow Week, 7/25/2005
A financial analyst has raised his rating on Penton Media's notes in the belief that the company could be scooped up by a buyer in the current merger-and-acquisition wave.
Stephen Sweeney, a Jeffries & Co. high-yield analyst, raised his rating on some of Penton's senior subordinated notes from "buy" to "strong buy" on the rationale that the notes would be worth their value if Penton were acquired for a multiple of 10 times operating cash flow, which is in the low range of multiples associated with recent transactions.
"We see no reason why Penton would not be able to garner a market multiple of at least 10X EBITDA (earnings before interest, taxation, depreciation and amortization) if in fact it is acquired," Sweeney wrote.
In 2004, Penton, a producer of 35 tradeshows and conferences, reported its first year-over-year revenue increase since 2000. The company's $212.7 million revenue — up nearly $7 million from $206 million in 2003 — included gains for online activities and events, but a decline for publishing.
Penton credited its Natural Products Expos and Comfortech for event revenue climbing to $51.4 million, up more than 16 percent from $44.2 million in 2004.
Furthermore, Penton narrowed its 2004 net loss to $67.2 million, from $93.1 million in the previous year. The company in February trimmed $5.5 million from its $329.1 million in debt. Its delisted shares, however, were lately still hovering around the 25-cent mark.
Board Chairman Royce Yudkoff, president of ABRY Partners, didn't return a call seeking comment. Three years ago, ABRY Partners invested $50 million in Penton to help pay down its debt.
Sweeney noted that the company's EBITDA margins have risen to 29 percent in the first quarter of this year. That compares with 7.8 percent EBITDA margins in the second quarter of 2004.
Penton last year replaced longtime CEO Tom Kemp with David Nussbaum, a company executive vice president, in a management shakeup designed to further trim costs.
Even if the century-old Cleveland company doesn't join Advanstar Communications and Primedia's business information segment on the sales block, its notes will remain a promising investment, Sweeney noted.
"In the event Penton is not acquired, we believe the bonds are still attractive due to the improving fundamentals of the business (and) adequate liquidity," the analyst wrote in his report.
