Barclays On Informatica Rumor: Takeout Candidate Investors Have To Decide Between Meaningful Growth (Sacrificing Near-Term Profitability) And A Sale

In a report rolled out Wednesday, Barclays analysts Raimo Lenschow and Saket Kalia commented on the rumor about Paul Singer’s Elliott Associatespushing for a sale of Informatica Corporation INFA.

Analysts at Wedbush already weighed in on the situation, and said that plans to sell the company are “nonexistent.” They added: “management’s plans to invest in growth are counter to the path a company would take to cut costs ahead of a private-equity sale. Further, Informatica's management has a good reputation, allowing them room to make improvements without activist pressure.”

However, Barclays’ view is somewhat different. Lenschow and Kalia say that “takeout candidate investors now face a decision whether to play for meaningful growth while sacrificing profitability in the near term, or to have the company work with Elliott Management to find a buyer.”

With Elliot owning more than 8 percent of Informatica Corporation, they “see the case for an LBO above the current stock price and [have] created an interactive LBO model to explore the investment case for a go-private transaction.” According to the report, their work “suggests that a valuation range of $42-$50 per share is plausible, but such a path would forsake the potential growth.”

The research firm maintains an Equal Weight rating on the stock and a $39 price target. The stock is trading just shy of $42 per share on Thursday morning.