Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

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

Search for Jobs

Index Last Change % Change
Dow 19,216.24 45.82 0.24%
Nasdaq 5,308.89 53.24 1.01%
S&P 500 2,204.71 12.76 0.58%
Treasuries 2.39 -0.00 -0.13%
Data as of 5:55am ET
Company Price Change % Change
Bank of America Corp... 21.84 0.61 2.87%
Chesapeake Energy Co... 7.48 0.25 3.46%
Ford Motor Co 12.44 0.20 1.63%
Freeport-McMoRan Inc... 15.87 0.45 2.92%
Apple Inc 109.11 -0.79 -0.72%
Data as of Dec 5
Sponsors

Sections

Prosecutors say a former Expedia IT professional stole passwords that allowed him to score more than $331,000 in illegal trading profits. More

Facebook, Twitter, Microsoft and Google's YouTube say they will create a shared database to help them track and remove "violent terrorist imagery or terrorist recruitment videos." More

Billionaires, they're just like us. Except they own an average of nine overseas homes, have 10 vehicles and possess nearly $20 million in fine art, according to a new report. More