American Capital Acquires Premier Food - Analyst Blog

American Capital, Ltd. ACAS took a step toward strengthening its portfolio by acquiring Premier Food Services through its subsidiary, SMG Holdings, Inc. The financial terms of the transaction were not disclosed.

Premier Food Services, founded in 1985, is one of the leading providers of outsourced food and beverage services in southern California. Its addition will compliment SMG Holdings' entertainment and conference venue management services business. Also, SMG Holdings will gain access to Premier Food Services' diversified client base, ranging from education clients to aerospace and technology firms to racing venues.   

We expect the acquisition news to generate some momentum for American Capital and hence, offset much of the disappointment caused by the company's poor performance in first-quarter 2014.

American Capital's share price has fallen by 8.4% since May 7, while the Zacks Consensus Estimate has decreased by 16.3% to 77 cents per share for 2014 over the last 30 days. A brief discussion of the company's quarter result is provided below:    

Operating income were 2 cents per share, significantly lagging the Zacks Consensus Estimate of 22 cents and the prior-quarter earnings of 14 cents. Total operating revenue declined 29% sequentially, due to 23% fall in total interest and dividend income as well as 50% decline in fee income. American Capital's operating expenses increased by 3%.

American Capital currently has a $3.9 billion market capitalization and carries a Zacks Rank #3 (Hold). Some better-ranked companies in the same sector include Fifth Street Senior Floating Rate Corp. FSFR, BancFirst Corporation BANF and Old Second Bancorp Inc. OSBC. While Fifth Street sports a Zacks Rank #1 (Strong Buy), both BancFirst and Second Bancorp hold a Zacks Rank #2 (Buy).