AVID's Acquisition Influences Analyst Downgrade: Unpacking The $1.4B Deal And Share Premiums

Truist Securities analyst Terry Tillman downgraded Avid Technology Inc's AVID rating to Hold from Buy at a reduced price target of $27.05 from $45.00.

The action reflects AVID's deal to be acquired in an all-cash transaction worth around $1.4 billion (including AVID's debt).

As per the terms, AVID shareholders will receive $27.05 in cash for each common share. The cash purchase price represents a premium of 32.1% over the closing share price as on May 23, 2023, the last full trading day before media speculation regarding a potential sale deal.

Considering nothing else materializing to this point, the analyst believes this is the best and final offer. 

The analyst sees the buyout multiples representing a large discount to software-centric 10% - 20% growers, trading at 4.9x EV/FY24 sales and 33.0x EV/FY24 FCF on a median basis.

Tillman expects AVID to report revenue of $454 million (vs. consensus $458 million) in FY23 and $504 million (vs. consensus $503 million) in FY24.

Last week, AVID reported Q2 FY23 revenues of $108.5 million (+11.1% Y/Y), beating the consensus of $103.5 million, and adjusted EPS of $0.22 above the street view of $0.21. 

Price Action: AVID shares are trading higher by 0.06% at $26.61 on the last check Tuesday.