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Verizon Communications Inc. (NYSE: VZ) has inked a definitive agreement to purchase FleetMatics Group PLC (NYSE: FLTX) for $60 per share. Imperial Capital’s Jeff Kessler downgraded the rating on FleetMatics from Outperform to In-Line, while raising the price target from $50 to $60.
The deal is 40 percent higher than the closing price of FleetMatics’s shares on July 29 and values the company at $2.4 billion.
“Our simple acquisition model using declining historical growth rates assumes that even if Verizon was to hold on to the FleetMatics business for 5 years, they could realize an internal rate of return (IRR) between 21-23%,” analyst Jeff Kessler mentioned.
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Deal Not Surprising
The transaction does not come as a major surprise, especially in view of FleetMatics’s recent share price and the higher valuation that Verizon placed on the deal.
“We believe that this acquisition will enable Verizon to become a bigger and more important participant in the connected-vehicle segment, and add advanced fleet management solutions to its suite of solutions,” Kessler added.
Another bidder for FleetMatics may emerge, since the price being offered by Verizon does not represent an excessively high valuation for the former company, which is a leading provider of fleet management SaaS and has been generating more than 20 percent growth with gross margins of 75 percent, the analyst stated.
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Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.