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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 18,547.30 17.88 0.10%
Nasdaq 5,260.08 15.48 0.30%
S&P 500 2,186.90 4.26 0.20%
Treasuries 1.55 0.01 0.91%
Data as of 4:31am ET
Company Price Change % Change
Bank of America Corp... 15.35 0.17 1.12%
Chesapeake Energy Co... 6.46 0.37 6.08%
Best Buy Co Inc 39.23 6.43 19.60%
Ford Motor Co 12.42 0.06 0.49%
General Electric Co 31.23 -0.09 -0.29%
Data as of Aug 23
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