After struggling to mimic the enthusiasm it benefited from in 2020, LL Flooring (NYSE:LL) finally saw significant upside movement in its share price. Holding company Live Ventures (NASDAQ:LIVE) offered to acquire the hard-surface retailer via an all-cash bid. Subsequently, LL stock popped 45% on the proposition, fading just slightly in the early afternoon hours.
According to the accompanying press release, Live Ventures — which levers a strategic focus on value-oriented acquisitions of domestic middle-market companies – disclosed the correspondence that it sent to LL Flooring on Wednesday. Specifically, it presented a non-binding offer to acquire 100% of LL stock in an all-cash transaction for $5.85 per share. This figure represents a 106% premium to LL’s closing price as of Oct. 6.
Under the letter, Live Ventures emphasized that it had prior experience working with retailers facing similar challenges that LL presently confronts. Further, it stated that adding the flooring specialist to the holding firm’s portfolio will help LL thrive. As well it would be a major catalyst for Live’s “buy-build-hold” strategy, thus enhancing shareholder value.
Notably, even with today’s pop, LL stock is still down 24% since the beginning of this year.
LL Stock Struggled Since the End of 2020
While Live’s offer for LL stock appears intriguing, the holding firm applied some pressure to the buy-out proposition. “We fear that the Company’s stock price will continue its decline unless LL Flooring enters into a transaction with a well-capitalized acquiror that has extensive experience working with synergistic retailers in the near term,” wrote Live CEO Jon Isaac.
Though a blunt projection, it’s not without reason. Peaking in late 2020, LL stock has since looked incredibly poor. On a weekly average basis, Google Finance data shows that at the time, LL was approaching $34 per share. Thus, falling into single-digit territory symbolizes a massive blow.
During 2020, LL managed to dramatically overcome prior controversies. Most notably, the company — which previously operated under the brand name Lumber Liquidators — had to pay $33 million for misleading investors about formaldehyde in its laminate flooring products sourced from China.
However, following an initial slump in the equities market in the spring of 2020, LL stock bounced higher based largely on “consumer investment in home improvement,” per LL’s fourth quarter and full-year 2020 financial disclosure.
Unfortunately, LL stock was unable to sustain the rally, with blistering inflation and the subsequent rise in borrowing costs crimping consumer sentiment.
Why It Matters
In the past one-year period, only one analyst – Loop Capital’s Laura Champine – covered LL stock, reiterating a “moderate sell” rating. Disclosed in August, Champine set a price target of $2, which at the time represented about a 48% decline.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
