Recall under review

Recall’s share price has jumped 11% after media speculation the global provider of document management and storage is in talks with its main US-based competitor, Iron Mountain, regarding a potential takeover. The company has since released a statement explicitly stating it is ‘not in discussions with Iron Mountain or any other potential buyer’.

Iron Mountain’s total revenues globally are four times larger than Recall’s. However, Recall dominates the Australian market with a 57% share, while Iron Mountain only has a 26% share. Even if the company is secretly in talks with Iron Mountain, any bid would immediately raise alarm bells with the Australian Competition and Consumer Commission (ACCC) because it would give the combined company a near monopoly. We're not holding our breath.

The stock’s share price has risen 24% since Recall stands firm as cloud gathers from 21 Feb 14 (Hold – $4.45). It doesn’t appear cheap on most metrics and the company boasts an enterprise value 15 times its earnings before interest and tax (EBIT) of US$133m for 2014. Nonetheless, Recall has stable revenues backed by high switching costs and we’d like to take a closer look. UNDER REVIEW.