ISC’s stock price rose sharply today after Friday’s announcement that NASCAR is bidding to acquire the track operator. After closing at $39.06 on Friday, just before NASCAR’s announcement, the stock was trading at $42.49 per share at presstime (+8.8%). That is close to the $42.00 that NASCAR bid per share in its effort to take ISC private. Meanwhile, Morningstar analyst Jaime Katz put out a research note on the bid, writing the offer — which is 11x ISC’s EBITDA in ’18 — is “generally lower than the multiples we have seen offered on recent acquisitions."
Katz offered “two reasons for a depressed offer." First, the France family already owns most of ISC, so the “impetus to pay a significant premium is low." Second, ISC’s returns on invested capital “remain weak, at a mid-single-digit level," and Morningstar believes that would “limit the premium any buyer would want to pay up on a business capturing negative economic rents." Katz: “Despite the Frances holding more than 70% of the voting power to affect the transaction, we believe there are a few mitigating factors that could delay a formal bid." Katz concluded: “Independent of the transaction, we don’t anticipate any change to the France family’s leadership and vision for NASCAR." Adam Stern/SBD