Thursday, May 24, 2007

Runco sold to Planar for an oddly small bag of loot

I would have commented on this earlier, but last night was my 8th wedding anniversary. I'm actually quite happy about that so I didn't feel compelled to sit in front of a computer, as you might imagine.

Regardless, luminary projector magnate Sam Runco has sold his baby off to Planar, a manufacturer of primarily industrial display devices. You can read the entire press release here, but I've encapsulated the good bits:

BEAVERTON, Ore., May 23, 2007 (BUSINESS WIRE) -- Accelerating its presence in the global custom home theater market and its corporate initiative to capitalize on high-value specialty display products and solutions, Planar Systems, Inc. (NASDAQ:PLNR) today announced it has acquired the assets of privately-held Runco International, Inc. for $36.7 million in cash. Financing to fund the purchase price consisted of $14.7 million in existing cash and $22.0 million of borrowing from the Company's amended credit facility.


Runco was founded in 1987 and recorded net sales as a private company of $54.6 million in the 12 months ending March 31, 2007, growing approximately 11 percent in the most recent quarter, compared with the same period a year ago. Runco employs approximately 120 people, the majority of whom are based at the company's headquarters in Union City, California. Planar's Home Theater business unit, including the Planar, Runco and Vidikron brands, will continue to be led by Scott Hix.

Now, I'm currently waiting on confirmation from sources as to whether that $54.6 million in revenue includes Vidikron's numbers, or just the Runco brand. Regardless, buying a $54.6 million (possibly $54.6 +) company for $36.7 million tells me that either Planar got a squeal of a deal, or Sam Runco knows something that they don't and he's laughing into his bellinis. My sources can't confirm that whether or not he likes drinking bellinis, but that seems like an appropriate celebratory beverage.

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Flatland Pastor said...

Here's a thought. Maybe Sam has been listening to Madonna's latest CD. I'm glad he's done well. He certainly has brought some great innovations to the AV world and he does deserve a big payday.

Maybe $36.7 mil cash is enough.

Salute Sam!

Jason said...

Well, looking at it now, Runco sold for 1.48 x SALES, not earnings. Still, seems pretty cheap, though.

I don't know what Runco's profit margin is, but let's say he was around 20% profit margin: He still sold out for 5.35 times earnings at 20%, and that doesn't even account for future expected growth.

Even at a 10% profit margin, that's only 10.65 times earnings. That's more in the ballpark, but seems like Sam Runco didn't hold out for much in the way of goodwill and brand equity.

Then again, 37 million dollars probably well exceeded his exit plan when he started the company, and every decision like this with a privately held company involves logic and considerations known only to the players involved.

If Sam's happy with it, I wish him many healthy years of golf, tennis, and the joys of family life - and congratulations are in order on building a great company and great brand.

Congratulations are also in order for Planar on a terrific value acquisition. Buffet would be proud.

Lee_D said...

Those are excellent points, Jason. I guess in the last year I've been used to seeing CE companies going for truly remarkable premiums.

Regardless, Sam Runco is a legend, and certainly deserves this payday considering what he has done for our industry, and I am happy for him.

Stephen Johnson said...

Great optics, lousy ethics. Their earlier plasma PL50c panels are derived from the Pioneer PDP 502. This Pioneer and a slew of others suffer from defective power supplies. There are two class action suits filed against Pioneer and they offer FREE change out in your home. No cost for parts or labor and warranty period does not apply. Runco uses the Pioneer as the base for their unit. Same power supply. When one goes bad they charge you for the power supply and for the labor. Called and told them about the class action suit and none of their customer service had heard about it. To add insult onto injury, when they replace the power supply they do not put in the upgraded power supply, they put in the same defective part number that Pioneer is replacing. BUT, their products look great. Just don't need help.