Cabela's Downgraded By Barclays Following Monday's 15% Rally

Cabelas Inc CAB rallied more than 15 percent following the company’s announcement that it had entered into a definitive agreement to be acquired by Bass Pro Shops.

Barclays’ Matthew McClintock downgraded the rating on Cabelas from Overweight to Equal-Weight, while raising the price target from $50 to $64.

McClintock believes the company’s assets are now fully valued and no longer has problems with funding.

Related Link: Cabela's, Bass Pro Shops Announce Landmark Merger Valued At $5.5 Billion

The proposed acquisition by Bass Pro Shops is for $65.50 per share in cash, which represents an aggregate transaction value of about $5.5 billion.

“Furthermore, upon closing, Bass Pro Shops will commence a multi-year partnership with Capital One Financial Corp. COF to originate and service the Cabela’s CLUB co-branded credit card,” the analyst mentioned.

McClintock believes that a merger between Cabela’s and Bass Pro Shops would be very complementary, and that the combined entity would account for revenue of about $7.5 billion.

Upside To Expectations

“We believe upside to investor expectations regarding the value of the deal could be driven by the financial agreement with Capital One,” the analyst went on to say.

Given the receivables growth and robust credit metrics of Cabela’s credit card portfolio, McClintock believes that the bidding process for the company’s assets should have been competitive and “could herald a significant retailer share arrangement.”

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