Paul Singer's Stake In Informatica Corp.: Deutsche Bank Analysts Share Their Thoughts

In a Schedule 13D filed with the SEC Monday, January 26, Paul Singer’s Elliott Associates disclosed an 8.8 percent stake in Informatica Corporation INFA. The activist investor said he might propose a sale of the company, and contacted the company’s management with the intention of discussing “steps to maximize shareholder value.”

While the corporation did not respond to Singer’s request directly, the management did move its fourth quarter earnings call two days forward, to January 27.

Related Link: Informatica Jumps After Activist Paul Singer Reveals An 8.8% Stake

In a report published Tuesday, January 27, Deutsche Bank research analysts Karl Keirstead and Imtiaz Koujalgi shared their thoughts on Elliot’s position. The analysts believe that, following the Riverbed and TIBCO deals, “Elliott is probably looking at INFA as a “take-private” candidate (for a private equity firm) more so than a strategic acquisition target for the likes of IBM or Oracle,” and suspect that the firm sees it as a better asset than TIBCO due to its long-term market growth potential.

They also consider that the move raises the probability of “a greater focus on cost reduction.”

On the opposite, Keirstead and Koujalgi don’t see Elliot forcing near-term leadership changes or substantial share buy-back plans, but envision “three risks to a strong bullish call on the stock at $41, including (a.) INFA shares are now just approximately 10 percent away from where it would trade if it were acquired at TIBCO’s multiples, and the stock is near a two-year high; (b.) we [the analysts] worry that end market demand remains mixed at best; and (c.) we suspect that INFA will counter that it must accelerate (not pull back on) spending to drive growth as its core data integration market changes given the Cloud and Big Data drivers.”

After considering all of these factors, Deutsche Bank reiterated a Hold rating on the stock, but raised its price target to $40, based on an assumed P/E multiple of 25x its 2015 non-GAAP EPS estimate.