Investment research consolidator Multex(Nasdaq: MLTX) is being acquired by reporting giant Reuters(Nasdaq: RTRSY) at a 60% premium to yesterday's share price. Multex shares leapt from $4.50 to above $7 this morning on news that Reuters would pay the equivalent of $195 million for the 94% of Multex shares it doesn't already own.

Today's buyout price gives Multex a market value of about $235 million, but it also holds $50 million in cash, giving the deal an enterprise value of $185 million. That's about two times its $92 million in 2002 sales, and 16 times its 2002 EBITDA (earnings before interest, taxes, depreciation, and amortization) of $11.5 million. Multex lost $7.4 million last year, and is expected to be slightly above breakeven this year.

Reuters, meanwhile, is suffering declining sales, recorded its first annual loss, and warned today that the first half of 2003 would not usher in a recovery. It now expects to cut 3,000 jobs (rather than 1,000) by 2005. Today's acquisition offers a small ray of sunshine. Multex will give Reuters lucrative access to the investment research community at a time when the industry is undergoing change. Change means opportunity. Investment firms may soon be required to provide third-party research and Multex is angling for a piece of that large pie.

It does not appear that Reuters is overpaying for Multex, implying that the stock was undervalued -- at least to an acquiring company -- at $4.50 per share. Reuters can scale Multex to increase its value. So, could peers be "cheap" as well? TSCM) and MarketWatch(Nasdaq: MKTW) have improving financials and substantial cash, but they continue to suffer depressed share prices. Questions remain: How long before earnings would make the stocks attractive? And would a company want to acquire either before then?

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