Nierenberg Investment Raises Stake in Electro Scientific Industries (ESIO) to 8.3%
In an amended 13D filing on Electro Scientific Industries Inc. (Nasdaq: ESIO), Nierenberg Investment Management discloses an 8.3% stake (2.42 million shares). This is up from the prior 7% stake the investment firm disclosed in a past 13D filing. The group said they are continuing to buy the shares because they believe they are a bargain, trading, net of cash, at what they estimate is less than ten times calendar 2007 earnings.
The group also said they agree with ESIO management that the principal use of the company's $229 million in cash should be to accelerate profitably the company's growth.
From the 'Purpose of Transaction' section of the filing:
"We are continuing to buy shares of ESIO and have modified somewhat our objective for this investment.
We are continuing to buy the shares because we believe they are a bargain, trading, net of cash, at what we estimate is less than ten times calendar 2007earnings. ESIO's ratio of total enterprise value to calendar 2007 revenues, we believe is only 1.1. These valuation anomalies are occurring at a time when ESIO is growing, profitable, and generating cash. The investments which ESIO has made in R & D during the past two years are paying off in order and revenue growth and market share gains. And ESIO's two largest end user markets, memory chips and capacitors, are strong and strengthening respectively.
In our initial Schedule 13D filing, we called on ESIO to put its excess cash to work in a manner which would build shareholder value. We have learned since filing that 13D, through statements made on ESIO's July 13, 2006 investor call that ESIO has, in fact, been in active pursuit of strategic growth acquisitions. Now that ESIO has announced through its July 20, 2006 press release the addition of a new CFO, it is our hope that the company will accelerate its acquisition program.
We agree with ESIO management that the principal use of the company's $229million in cash should be to accelerate profitably the company's growth. As long as we continue to see forward progress using the cash that way, we will refrain from advocating that ESIO pay its owners a large one time cash dividend.
The previous statements by the Reporting Persons as to their views regarding this investment represent solely their own analyses and judgments, based on publicly-available information and their own internal evaluation thereof. Those statements are not intended, and should not be relied on, as investment advice to any other investor or prospective investor. To the extent those statements reflect assessments of possible future developments, those assessments are inherently subject to the uncertainties associated with all assessments of future events; actual developments may materially differ as a result of circumstances affecting ESIO and/or extrinsic factors such as developments in the company's industry and the economic environment. The Reporting Persons reserve the right to change their internal evaluation of this investment in the future , as well as to increase or decrease their investment depending on their evaluation, without further amending their Schedule 13D except as required by applicable rules."
The group also said they agree with ESIO management that the principal use of the company's $229 million in cash should be to accelerate profitably the company's growth.
From the 'Purpose of Transaction' section of the filing:
"We are continuing to buy shares of ESIO and have modified somewhat our objective for this investment.
We are continuing to buy the shares because we believe they are a bargain, trading, net of cash, at what we estimate is less than ten times calendar 2007earnings. ESIO's ratio of total enterprise value to calendar 2007 revenues, we believe is only 1.1. These valuation anomalies are occurring at a time when ESIO is growing, profitable, and generating cash. The investments which ESIO has made in R & D during the past two years are paying off in order and revenue growth and market share gains. And ESIO's two largest end user markets, memory chips and capacitors, are strong and strengthening respectively.
In our initial Schedule 13D filing, we called on ESIO to put its excess cash to work in a manner which would build shareholder value. We have learned since filing that 13D, through statements made on ESIO's July 13, 2006 investor call that ESIO has, in fact, been in active pursuit of strategic growth acquisitions. Now that ESIO has announced through its July 20, 2006 press release the addition of a new CFO, it is our hope that the company will accelerate its acquisition program.
We agree with ESIO management that the principal use of the company's $229million in cash should be to accelerate profitably the company's growth. As long as we continue to see forward progress using the cash that way, we will refrain from advocating that ESIO pay its owners a large one time cash dividend.
The previous statements by the Reporting Persons as to their views regarding this investment represent solely their own analyses and judgments, based on publicly-available information and their own internal evaluation thereof. Those statements are not intended, and should not be relied on, as investment advice to any other investor or prospective investor. To the extent those statements reflect assessments of possible future developments, those assessments are inherently subject to the uncertainties associated with all assessments of future events; actual developments may materially differ as a result of circumstances affecting ESIO and/or extrinsic factors such as developments in the company's industry and the economic environment. The Reporting Persons reserve the right to change their internal evaluation of this investment in the future , as well as to increase or decrease their investment depending on their evaluation, without further amending their Schedule 13D except as required by applicable rules."
posted by Lon at 11:43 AM
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