FAT Brands Throws Its M&A Weight Around With Hurricane Grill & Wings Acquisition

Shares of FAT Brands Inc FAT quickly reversed course to go green Wednesday after reporting the acquisition of Hurricane Grill & Wings.

R.F. Lafferty analyst James Anderson told Benzinga in an email, "I think this is extremely good news for the company going forward."

The Deal

For a purchase price of $12.5 million, FAT Brands - a franchising company focused on acquiring fast casual dining concepts that had its IPO in October of this year - will takeover the tropical-themed Hurricane Grill & Wings. The deal is expected to close by year-end.

The Guidance

Reflecting expectations for expected synergies from the new addition, FAT Brands announced an adjusted EPS forecast of $1.10 or more, with system-wide sales of more than $360 million. The company looks to start paying an annualized dividend of $0.48 per share in 2018.

Related Link: FAT Brands, Home of The Fatburger And Ponderosa, Initiated With Buy Rating At Lafferty

Reaction

Anderson, prior to the announcement, initiated coverage on FAT Brands with a Buy rating and $12.50 price target.

"Obviously while we expected and continue to expect FAT Brands to make acquisitions this is still very fresh news," Anderson said in the email. "I think it will be a great fit in their current portfolio as Hurricane’s BTW in particular synergizes well with their existing supply chains for both burgers and wings while adding Mexican cuisine offering opportunities for their franchisees."

Anderson noted that without more specifics about how the deal is being financed, it's too early to know how it will affect the firm's guidance or price target on the stock.

FAT Brands shares were languishing around daily lows of $8.80 before being halted pending the news. Following the acquisition announcement, shares resumed trading and quickly went green, rising as high as $10.53, before settling to $10.04, up 7.04 percent in midday trading.