Shares of Planar Systems Inc., which makes monitors and industrial displays, fell Thursday after an analyst suggested its $36.7 million acquisition of Runco International Inc. would bring integration challenges.
Beaverton, Ore.-based Planar Systems said after market close Wednesday it would buy home theater product maker Runco for $14.7 million in cash and $22 million borrowed from its amended credit facility.
Runco was founded in 1987 and posted sales of $54.6 million in fiscal 2007. The company is based in Union City, Calif.
The company anticipates the deal will slightly lower its earnings in 2007, but will boost its adjusted profit in fiscal 2008.
Pacific Growth Equities analyst Satya Chillara downgraded Planar Systems to "Neutral" from "Buy" citing the effect of the Runco acquisition and the continued integration of Clarity Visual Systems Inc., acquired in September of last year.
He said that while Planar Systems industrial and medical segments will likely be strong in the second half of the fiscal year, the integration of the two businesses "will likely keep a lid on the stock."
"We feel the current valuation of the company is not compelling and we would advise investors to remain on the sidelines until Planar Systems can work through the challenges that we believe are ahead of them," Chillara said.
Shares fell 33 cents, or 4.2 percent, to $7.45 in midday trading. The stock had traded between $7.30 and $14.36 in the past 52 weeks, and is off nearly 17 percent since the start of the year.
