Is the Buyout Offer for K Swiss Inc (KSWS) Fair?

Nevertheless, what is good about the company is its strong balance sheet. As of December 2012, it had $132 million in total stockholders’ equity, $43 million in cash and only $1 million in short-term debt. With a recent offer of $170 million, K-Swiss is valued at 0.76 times sales and nearly 1.3 times book value. As K-Swiss generated negative EBITDA, the EBITDA multiple is not valid.

Nike, with its current trading price of around $55 per share, is worth nearly $49.1 billion on the market. The company is valued at 1.94 times sales and as high as 4.87 times book value. The EBITDA multiple is 13.4. Adidas is trading at around $47 per share, with a total market cap of nearly $19.2 billion. The market is valuing Adidas at a cheaper valuation than Nike at 1 times sales and 2.5 times book value. The EBITDA multiple is also lower at 10.2.

Foolish bottom line

I personally think E.Land World is buying K-Swiss to restructure it by slashing its significant SG&A expenses. For E.Land World, K-Swiss seems to be a good deal as it has a high probability of success to turn K-Swiss around. However, for individual investors, K-Swiss has not been a good stock to accumulate since 2008.

The article Is the Buyout Offer for K-Swiss Fair? originally appeared on Fool.com.

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