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RadioShack surges on merger speculation

By Aaron Smith, CNNMoney.com staff writer


NEW YORK (CNNMoney.com) -- RadioShack's stock price surged on speculation that the retailer might be headed for a merger, or seeking another type of deal with potential investors.

The stock for RadioShack (RSH), an electronics retailer based in Fort Worth, Texas, jumped 9% in midday trading on Friday.

Anthony Chukumba, analyst for BB&T Capital Markets, said the surge was "definitely" the result of a New York Post story speculating that the company is looking to merge with Best Buy (BBY, Fortune 500), or exploring a leveraged buyout with investors.

"I guess there was some talk about this a few weeks ago and it looks like it's rearing its head again," said Chukumba. "People probably think there's some credence to this."

But the analyst described a potential merger with Best Buy as "extremely unlikely," because the big box retailer already has a partnership with Carphone Warehouse, giving it exposure to the wireless business and eliminating any benefits from a merger with RadioShack.

"There's no good strategic buyer for RadioShack," Chukumba said. "Who would buy them? I would say there's a higher probability of a leveraged buyout than a strategic buyout."

He said some investors might find the company attractive partly because of recent improvements in the high yield market, and partly because the company has a strong balance sheet, with its $908 million in cash outweighing its $669 million in debt.

But a share buyback remains the greatest possibility for RadioShack, said the analyst, because "that's something that RadioShack, at the snap of its fingers, could do" without having to forge a deal with other companies or investors.

RadioShack spokesman Eric Bruner declined to comment.

"As a matter of policy, we do not discuss market rumors or speculation," he said.

Chukumba does not own RadioShack, but BB&T expects to receive compensation from the company for investment services in the next three months. To top of page

Index Last Change % Change
Dow 21,394.76 -2.53 -0.01%
Nasdaq 6,265.25 28.56 0.46%
S&P 500 2,438.30 3.80 0.16%
Treasuries 2.14 -0.01 -0.42%
Data as of 6:57pm ET
Company Price Change % Change
Advanced Micro Devic... 14.17 -0.21 -1.46%
Bank of America Corp... 22.82 -0.11 -0.48%
Micron Technology In... 31.73 -0.16 -0.50%
Ford Motor Co 11.04 -0.09 -0.81%
Oracle Corp 50.95 0.65 1.29%
Data as of Jun 23
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