Radyne Corporation
(NDAQ: RADN) shares moved up yesterday after an activist hedge fund
called on the company to hire an investment banking firm to explore
strategic alternatives. San Diego-based Monarch Activist Partners,
which didn’t disclose its investment stake, sent a letter to the
company calling on the board to consider strategic changes and perhaps
an outright sale of the company. Shareholders are hoping that Radyne
takes the advice and unlocks shareholder value.
“Monarch has given ample time to Radyne’s management and has
refrained from applying public pressure to highlight the disappointing
job performance,” said Sohail Malad, Managing Partner of Monarch. “If
management is unable to lay out a strategic plan that allows investors
to quantify what the current course will deliver, than it is our belief
that the public market should determine the value of the Radyne
businesses.”
Monarch believes that Radyne has potential but will never fully
realize the potential as an independent public company on the current
course. There is a growing gap between the value of the company as a
standalone entity versus the value of the enterprise in a sale
transaction. Moreover, the activist hedge fund reported that potential
strategic acquirers have already expressed interest in that the company
should take seriously. At a minimum, Monarch believes that the board
should conduct a marketing test in a publicly disclosed environment so
all would-be suitors can express interest in the company.
Radyne currently has a market capitalization of around $160 million
trading at just 13.8 times earnings, suggesting that the company is
undervalued. However, many are questioning the timing and motives
behind this request. The M&A market isn’t exactly the strongest
right now amid a difficult credit environment, while Monarch holds a
very small stake in the company. Regardless, this is definitely a
situation that is worth watching closely over the next few months!
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