Piper Jaffray: Don't Sell The Ascena-Ann Merger

In a report published Tuesday, Piper Jaffray analysts maintained a Sector Perform rating on Ascena Retail Group Inc ASNA, while raising the price target from $16 to $18, following the company's announcement to acquire Ann Inc ANN. Ascena has announced plans to acquire Ann Inc for $37.34 in cash and 0.68 of a share of ASNA stock, which translates to about $47 per share. This would be the company's fourth acquisition target in a little more than ten years. In the report Piper Jaffray noted, "We are favorable on this transaction despite the downward pressure in ASNA shares yesterday, and believe investors have a unique opportunity to buy ASNA shares at depressed levels for what could be significant stock price appreciation over time, especially as the integration of ANN INC. is underway and cost savings and synergies are achieved." The analysts believe that the transaction makes "a great deal of sense in helping shareholders unlock value," while adding, "A shared services business model is likely the more efficient way to accomplish sustained, positive returns on invested capital over time." The EPS estimate post the acquisition for FY16, FY17 and FY18 have been set to $1.05, $1.22 and $1.44, respectively.