NeuLion shareholders should take the Endeavor deal, Beacon Securities says

Digital video broadcaster NeuLion (NeuLion Stock Quote, Chart, News: TSX:NLN) Monday announced it has entered into a definitive agreement to be sold to privately-held entertainment company Endeavor for $250-million (all figures in US dollars, unless noted). The deal looks fair, says analyst Gabriel Leung with Beacon Securities, who is recommending that shareholders take the $0.84 (C$1.08) per share on offer.

Shares of NeuLion jumped on Monday morning with the news that it had agreed to be acquired by Beverly Hills-based Endeavor, a merger of the William Morris Agency and the Endeavor Agency and an owner of NeuLion client, UFC.

The friendly deal, which is subject to regulatory approvals and conditions, has reportedly been unanimously approved by NeuLion’s Board of Directors and by the written consent of holders of a majority of NeuLion’s outstanding common stock. The deal is expected to close sometime in Q2 2018.

In a note to clients on Monday, Leung says, “While we’re sad to see another small cap tech company get swallowed up, we feel the valuation is fair particularly given NeuLion’s recent profitability challenges and continued delays in consummating some of the larger opportunities in the pipeline.”

“We also feel the company will be able to better compete for deals with a large backer, particularly against the likes of BAMTech Media (now owned by Disney) who is both providing technology solutions and also acquiring content rights,” he says.

Leung’s revenue and EBITDA estimates for 2018 were $101.6 million and $8.7 million, respectively. The analyst has changed his recommendation from “Speculative Buy” to “Tender” and has moved his target price from C$0.70 to C$1.08.

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