Argus Downgrades Blackhawk Network Following Rally Triggered By Go-Private Announcement

Blackhawk Network Holdings Inc HAWK announced a going-private transaction where it will be acquired by private equity firms Silver Lake and P2 Capital for $3.5 billion or $45.25 per share.

With shares trading up since the Jan. 15 announcement and inching close to Argus' prior price target, the sell-side firm revisited is rating on the payments name this week. 

The Analyst

Argus analyst Jasper Hellweg downgraded shares of Blackhawk Network from Buy to Hold with no assigned price target. 

The Thesis

Even amid the broader market volatility seen in the past three months, Blackhawk Network shares have lost a mere 2.4 percent compared to a 7.6-percent drop in the broader market, Hellweg said in a note. The beta for the company's shares is 0.72, the analyst said, suggesting that the stock is less volatile than the market as a whole. 

After closing at $36.50 prior to the acquisition, the shares have gained over 23 percent and were recently off just 0.1 percent from the analyst's former price target of $45.

Blackhawk's board has unanimously approved M&A offer, with a closing date in mid-2018 likely, Hellweg said. 

Argus maintained its 2018 earnings per share forecast of $2.05, while it is modelling a 2019 EPS of $2.26 "for comparison purposes." 

The Price Action

Blackhawk Network shares have gained about 26 percent year-to-date.

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