Private equity firm Roark Capital is reportedly interested in acquiring Buffalo Wild Wings BWLD, but there has been no confirmation of a deal or any indication if talks are ongoing.
The Analyst
Deutsche Bank's Brett Levy downgraded Buffalo Wild Wings' stock from Buy to Hold with a price target boosted from $135 to $155.
The Thesis
Reports of Roark Capital's interest in acquiring B-Dubs for around $150 per share implies the stock at current levels is no longer favorable on a risk to reward basis, Levy said in the note. A price tag of around $150 represents a "relatively fair" offer and reflects the company's "depressed fundamental" and the need for Roark Capital to do a lot of "heavy lifting" to improve the business.
The reported takeover offer represents a 9 times 2018 EV/EBITDA multiple and a 29 times 2018 EPS multiple, which is also makes the offer "respectable," the analyst said. But in the event that a deal never occurs, then investors would resort back to valuing the company as a stand-alone entity and factor in the recent "soft" same-store sales trends and "little evidence" of any meaningful recovery.
"The risk-reward has become less favorable over the last few weeks as admittedly sales and operations remain under pressure, there is still an uncertain and sluggish macro and if the company remains independent, additional questions still need to be answered," Levy said.
Price Action
Shares of Buffalo Wild Wings were trading lower by 1.4 percent at $138.95 Friday morning.
The Sell-Side Take On B-Dubs Buyout Rumors
B-Dubs Headwinds Persist, But 2018 Looks Interesting
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