Wunderlich Considers The Prospect For A Go-Private Deal By Skullcandy

In a 13D filing issued on June 7, Skullcandy Inc SKUL's founder and former CEO, Rick Alden, mentioned he was exploring the possibility of the company going private.

Wunderlich’s Rommel Dionisio maintains a Buy rating on the company, with a price target of $7.

Going Private

Alden’s family trust owns about 12.7 percent of Skullcandy’s shares outstanding at present, Dionisio mentioned, while noting that management had made no comment nor issued any formal response to any such potential transaction.

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“Given the recent selloff in shares of SKUL, and subsequently the sharp discount multiple on the stock, such a transaction could indeed look attractive,” the analyst stated.

Dionisio pointed out that recent transactions in the consumer electronics accessory space had been completed in the 5x–6x EBITDA multiple range.

This valuation range suggests a potential take out price for Skullcandy of $5.50–$6.50 per share.

Sales & Market Share

“Despite recent competitive promotional challenges, domestic sell-through of the Skullcandy brand has been strong,” according to the Wunderlich report.

Skullcandy grew more than twice as fast as the overall audio headphone industry in 1Q, driven to some extent by the brand’s expansion into wireless headsets.

In addition, Astro gaming headsets also gained market share, despite facing temporary supply issues.