Analysts At BB&T Revisit A Williams-Sonoma/Restoration Hardware Merger

Anthony Chukumba of BB&T suggested back in April 2014 that Williams-Sonoma, Inc. WSM should acquire Restoration Hardware Holdings Inc RH.

On Wednesday, the analyst revisited the thesis, noting a deal "makes even more sense now than it did two years ago."

Chukumba stated in his latest note that an acquisition of Restoration Hardware would allow Williams-Sonoma the ability to offer a complete "good, better, best" assortment at various price levels. For instance, the West Elm serves as the entry level "good" brand, Pottery Barn is the "better" brand given its mid-range range and Restoration Hardware's assortment would act as the premium "best" brand.

The analyst continued that an acquisition of Restoration Hardware would also create "substantial" synergies in several areas, including purchasing, distribution, direct marketing and corporate overhead costs. Meanwhile, Restoration Hardware's brand would benefit from Williams-Sonoma's direct sourcing relationships and expertise in supply chain.

Finally, Chukumba stated that even if Williams-Sonoma were to offer $50 a share to acquire Restoration Hardware, the deal would be 16.0 percent and 24.7 percent accretive to its 2017 and 2018 earnings per share, respectively.

Bottom line, even if Williams-Sonoma were to pay more than $50 per share to acquire Restoration Hardware, the transaction would still be meaningfully accretive.