Companies in the Middle East aren’t the only ones leveraging the weak dollar to buy American businesses. Just yesterday, the Netherlands’ Royal Phillips Electronicsdropped $2.7 billion on Genlyte, a Louisville, Ky., firm that makes light fixtures. Cramer thinks Phillips’ next bid could be for Acuity, which is also in the fixture business.
With 40% of a building’s energy lost to lighting, there’s a need to retrofit old fixtures to make them more efficient, especially considering that most of the $125 billion worth of fixtures are pre-1990 and need replacing. That’s where Acuity comes in. The company’s management already noted the potential for multimillion-dollar lighting contracts, which isn’t bad for a $1.5 billion company.
Cramer also likes Acuity as a play on nonresidential construction, which isn’t suffering any of the hardship residential construction is going through. This sector accounts for about 75% of Acuity’s business.
AYI could be worth $20 more if Phillips made a bid, Cramer said. Acuity trades at 13 times earnings and seven times its enterprise value over its earnings before interest, taxes, depreciation and amortization. Genlyte got a bid worth 20 times earnings and 10 times enterprise value over EBITDA. Average the prices from the two metrics and you get a $57 stock, 54% above the present stock price. And that’s no big deal to a European company that’s getting 50% off everything that’s dollar denominated.
Cramer thinks Acuity is next on Phillips’ shopping list. Even if it’s not, the company is a great play on saving businesses money on energy efficiency, and that Genlyte deal showed just how cheap Acuity really is.
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