Barclays is positive on AdvancePierre Foods Holdings Inc APFH's acquisition of Allied Specialty Foods, a manufacturer of raw and cooked beef and chicken Philly steak products, for $60 million in cash.
"We see this transaction as attractive from both financial and strategic standpoints," analyst Andrew Lazar wrote in a note.
Allied could broaden AdvancePierre's customer and channel exposure as it allows the company to enter the cooked Philly segment in foodservice, "a logical white space opportunity given APFH's leading position in raw Philly."
Furthermore, the analyst noted that APFH would leverage Allied's strong market position in the Philadelphia area, while also utilizing its manufacturing assets to provide capacity for its own growing raw Philly steak business.
Lazar expects savings to come from manufacturing footprint efficiencies, procurement benefits, and SG&A. Net of these synergies, APFH anticipates Allied to add $0.07-$0.09 to EPS in 2017 and $11-$13 million in EBITDA.
The analyst has an Equal0Weight rating on the stock, with a $27 price target. At time of writing, shares of AdvancePierre were down 0.34 percent to $26.44.
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