GENNUM CORP. $13.50 (Toronto symbol GND; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 35.5 million; Market cap: $477.8 million; Price-to-sales ratio: 3.5; Dividend yield: 1.0%; TSINetwork Rating: Average; www.gennum.com) soared 119% in one day after the company accepted a $13.55-a-share takeover offer from U.S.-based Semtech Corp. (Nasdaq symbol SMTC). It’s clear that Semtech shares our high opinion of this well-managed junior company.
Gennum went through a sharp setback in the recession, as TV broadcasters had less to spend on the company’s equipment, which lets them store, edit and transfer video signals.
That’s why the stock fell from $14.50 in January 2007 to just $3.50 in December 2008. It rebounded to $8.35 in February 2011, but moved down to $5.75 in December 2011.
As part of a major restructuring plan that it instituted in response to the slowing sales, Gennum sold its slow-growing hearing aid and headset businesses. It used the cash to buy firms that specialize in the fast-growing area of chips that speed up the flow of data in computer networks.
Throughout the recession, Gennum continued to spend a high 30% or more of its revenue on research. It also maintained ample cash reserves and had little long-term debt.
Gennum investors should tender their shares to Semtech to receive the full $13.55 a share without paying brokerage fees.
