RadioShack takeover rumours, updated

Tuesday, 22 June 2010


I’ve been keeping a close eye on Radioshack for some time. Not the team… but the company and its stock price because the company is a potential takeover candidate, potential prey to rival electronics retailer Best Buy or to a bid from private equity. It’s an interesting back-story to the team. I wrote about all of this back in March and it’s nice to see the story gathering pace within the cycling-specific media.

The rumours surfaced in March in the New York Post and then again in June with the Post again.. but since then the trail has gone a bit cold. This isn’t to say a takeover won’t happen but the market looks less inclined to believe the rumours, especially since the shares have been range-bound between $18 and $23 dollars all year, despite the excitement of bid talk. At the same time the company is only being named as a stockmarket prey because it’s a stock market ugly duckling, this is not a prize asset.

Anyway, the story is back on the radar screen, there was a recent article in 24/7 Wall Street suggesting the company is toast:

RadioShack(NYSE: RSH) is one of the oldest retailers in the US… …RadioShack is currently a takeover target. There have been rumors that the company may be taken private via a leveraged buyout or purchased by Best Buy, probably for its locations. Best Buy (NYSE: BBY) would certainly not keep the RadioShack brand because it is considered downscale and does not have the reputation for quality products and service that Best Buy enjoys. RadioShack has already began to rebrand itself as “The Shack,” an indication that it knows the older brand is a burden.

So perhaps a takeover, but also because the brand is looking a bit tired: the article is thinking aloud, rather than anything new.

Let’s note one foil to the fusty image of Radio Shack is the investment in the cycling team, with its dynamic image and especially, for now at least, the powerful association with Lance Armstrong. As I wrote before, the company was very slow to embrace this marketing connection, but eventually they brought Armstrong out of hiding.

What happens in the background doesn’t matter to the team in the short term at least, Armstrong is certain to start the Tour de France. But what happens after could be more interesting, the combination of a Federal investigation, corporate takeovers and old father time could mean Armstrong thinks about retirement sooner rather than later. It could be that Bruyneel is hunting for new backers sooner than he’d like to.

One to watch…and I’ll keep you updated.

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