For a company in the movie projection and cable-television business, ARC International is hardly in the spotlight. But it may capture notice on Wall Street before long as a value play. Currently at 3 1/2 on the American Stock Exchange, Toronto-based ARC is a classic example of a company "whose pieces are worth more than what its stock is selling for," says one money manager.
Analyst Bill Bloch at M.H. Myerson agrees. "ARC's breakup value based on estimated 1993 earnings estimates comes to 6 a share," figures Bloch, who believes the company made some money for the first time in 1993--about 4 a share. He sees total earnings of 22 in 1994 on projected sales of $75 million. The company is planning to spin off to the public within weeks two of its three divisions: Cabletel Communications, a leading full-service distributor of equipment for cable-TV transmission, which accounts for 27% of operating profits and 42% of revenues, and Ballantyne, a leading maker of long-range spotlights typically used in concerts, auditoriums, and live performances at theme parks. The Ballantyne unit generates 53% of ARC's operating earnings and 34% of revenues. ARC is expected to spin off 40% of each division, says one insider.
As a stand-alone company, Cabletel will probably be priced at $10 million to $12 million, says this insider. Ballantyne is expected to be given roughly the same value. These two divisions are worth a combined $4 to $5 a share in ARC stock, figures this pro. "The purpose behind the spin-offs is to give these two divisions an opportunity to grow, partly through acquisitions,"
says ARC President and CEO Arnold Tenney.