Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Multi-Fineline Electronix Inc. Surged Today

By Timothy Green - Feb 5, 2016 at 1:35PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The circuit board manufacturer is being acquired by a Chinese conglomerate.

What: Shares of circuit board manufacturer Multi-Fineline Electronix (NASDAQ: MFLX) surged on Friday after the company announced that it was being acquired by Suzhou Dongshan Precision Manufacturing. At 12:40 p.m. ET Friday, the stock was up about 37%.

So what: Suzhou Dongshan Precision Manufacturing, a supplier of precision sheet metal components based on China, agreed to pay $23.95 per share for Multi-Fineline, a 40.8% premium over the stock's closing price on Feb. 3. The transaction has already been approved by the boards of both companies.

Multi-Fineline CEO Reza Meshgin pointed out the benefit of being acquired by a larger company. "We are pleased to have reached this agreement, which we believe realizes significant, immediate cash value for our stockholders, offers new opportunities for our employees and supports the future needs of our customers," Meshgin said. "Positioning MFLEX within a larger manufacturing conglomerate will also open new market opportunities for our flexible printed circuit and assembly solutions, further supporting the Company's long-term growth outlook. In turn, our Board has unanimously concluded that partnering with DSBJ is the best strategic path forward for MFLEX."

Now what: The news of the acquisition came on the same day as Multi-Fineline's fourth-quarter earnings report. The company reported $169 million of revenue, down 19.5% year over year and about $4 million short of the average analyst estimate. Non-GAAP EPS came in at $0.45, down from $0.66 during the prior-year period, but a penny higher than analysts were expecting. The company pointed to weakness in the tablet and smartphone segments as the drivers behind its lackluster results.

The acquisition values Multi-Fineline at about 12.7 times non-GAAP earnings, and with the company's revenue having slumped over the past few years, the transaction seems like a good deal for investors.

Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/10/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.