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3 major Tampa Bay companies bulls-eyed on leveraged buyout list of likely targets

Wake up and good morning. Whenever talk turns to somebody picking off one of Tampa Bay's way-too-few larger public companies, I get nervous. So when some analysts at UBS bulls-eye three major area companies -- Clearwater's Tech Data Corp. and Lincare, and St. Petersburg's Jabil Circuit -- on a nationwide list of just 27 potential target companies ripe for a leveraged buyout, it's like Tampa Bay's business foundation is suddenly under attack.

When it comes to significant, multi-billion-dollar corporations that are publicly traded with headquarters somewhere in Tampa Bay, we're already talking about an endangered species. A leveraged buyout (LBO) typically means a targeted company, if public, becomes private and takes on substantial debt (hence the word "leveraged"). Deals like this change the company, its culture and often its profile in the community. Look at how the once public Outback Steakhouse company (complete with its other restaurant chains like Carrabba's and Bonefish Grill) was taken private and now operates as OSI Restaurant Partners.

The list by Randy Udell and Ben Canet of the UBS U.S. special-situations equities sales team was assembled because leveraged buyouts are increasing. Why? Because private-equity firms are hunting for stock market targets in which to invest tens of billions of dollars committed by pension funds and other institutional clients. The details are discussed in this recent Barron's story headline LBO Hunt: Who's Next?

What are the odds that three of 27 companies, more than 11 percent, on a leveraged buyout hit list would be based in Tampa Bay, or, more specifically, two cities in Pinellas County?

The UBS duo created the list by screening for multiple financial and business criteria, Barron's says. Among the assumptions is that private equity could offer at least a 15 percent premium above the stock price and that total debt of the privatized target can be no more than six times 2010 cash flow, defined as earnings before interest, taxes, depreciation and amortization.

"These stocks are attractive, based on valuation, and generate a lot of free cash," Udell states. The good news in all this? States Barron's: "Even if no deals materialize, these stocks could do well. The virtues that make them appealing to private-equity outfits could make them attractive investments."

Let's hope so.

-- Robert Trigaux, Business Columnist, St. Petersburg Times