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http://www.businessweek.com/stories/1994-07-24/knogo-sets-off-a-buzz

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Knogo Sets Off A Buzz


Inside Wall Street

KNOGO SETS OFF A BUZZ

There's nothing like a good merger story to pull a stock up in a hurry. That's what happened to Knogo after it announced in late June that it had hired Smith Barney to seek a buyer or a strategic partner with deep pockets. Shares of the maker of antishoplifting surveillance systems galloped from 10 in early June to 15. Is the party over then for Knogo's stock?

"Far from it," says Adam Hutt, head of research at I.A. Rabinowitz, a New York securities firm. He thinks Knogo has just started to roll. He puts its buyout value at $25. "The stock would be an attractive buy at 12 times its cash flow of $2 a share," says Hutt. Trading at 11 times estimated 1995 net of $1.35, Knogo has a book value of $12 a share. On sales of $94 million, it made 55 cents per share in 1993. He sees a net of 90 cents this year.

Rumors are that Sensormatic Electronics, a big manufacturer of electronic and video surveillance equipment, heads the list of companies looking to buy Knogo. Analysts say Sensormatic wants to dmminate "source-tagging"--attaching antitheft labels at the factory rather than the stores. Knogo owns a patented "universal source imbedding" technology that uses its minuscule Super Strip inserted in products such as shoes, clothes, and compact disks. Sensormatic Chairman Ronald Assaf says "we are always looking for companies with niche technology or products." But he declined comment on Knogo. Other companies rumored to be interested in Knogo: Checkpoint Systems, also a maker of electronic surveillance systems; 3M; and a European electronics company. Checkpoint wouldn't comment, and 3M didn't return calls.GENE G. MARCIAL


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