Market Overview

Bank Of America Sees Vitamin Shoppe Inc Going Private; GNC Holdings Inc Untouched

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Vitamin Shoppe Inc (NYSE: VSI) could soon go private while rival GNC Holdings Inc (NYSE: GNC) will probably remain untouched by rumors swirling around the nation's two largest dietary supplement retailers, an analyst said Wednesday.

Both companies have reportedly attracted recent interest from private equity funds while a further rumor has GNC pursuing the acquisition of Vitamin Shoppe.

Each of the companies has seen declining sales and recent management turmoil, while shares of both are down by double digits so far this year.

Among the rumored transactions, Bank of America's Curtis Nagle said the highest likelihood is that Vitamin Shoppe goes private.

The North Bergen, New Jersey-based company's chief executive announced his pending retirement recently, leaving a "leadership vacuum," while its spending aimed at sales growth is likely to depress the short-term profit gains beloved on Wall Street.

Reuters reported earlier this month that a number of large shareholders are quietly pushing for a sale of Vitamin Shoppe. Credit Suisse analysts earlier this summer said its acquisition by GNC could yield many benefits,

But Nagle is skeptical that GNC would make an offer for Vitamin Shoppe, citing GNC's debt and what he called "limited customer and product overlap" for the two companies, as well as his view that lower earnings growth would follow a merger.

A going private deal for GNC is likewise discounted by Nagle, who again cited its debt along with limited cost-cutting opportunities to attract private equity investors.

Nagle maintained a Neutral rating on Vitamin Shoppe with a $49 target. But he maintained a Buy on GNC with a $47 target, citing prospects for sales and earnings growth.

GNC traded recently down more than 2 percent to $37.90 a share; Vitamin Shoppe was changing hands at $43.57 per share, down 1.8 percent.

Latest Ratings for VSI

DateFirmActionFromTo
Jun 2019Initiates Coverage OnHold
Sep 2018ReinstatesEqual-Weight
Sep 2018DowngradesEqual-WeightUnderweight

View More Analyst Ratings for VSI
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Posted-In: Bank of AmericaAnalyst Color M&A News Rumors Price Target Reiteration Analyst Ratings

 

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