RBC Capital Raises Price Target on B&G Foods (BGS) Following Announced Acquisition

September 23, 2016 6:58 AM EDT
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Price: $44.45 --0%

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RBC Capital reiterated an Outperform rating on B&G Foods (NYSE: BGS), and raised the price target to $57.00 (from $52.00), following the company's announced acquisition of the spices business of ACH Food Companies. The acquisition price equates to approximately 9.4x EBITDA before synergies and excluding the cash tax benefit from asset purchase accounting. RBC anticipates roughly $200M of the $365M deal price will be paid with cash on hand.

Analyst David Palmer commented, "Following the announced acquisition of ACH’s spices business we are increasing our 2016e and 2017e EPS from $2.24 and $2.45 to $2.27 (+48% YOY; $2.19 cons.) and $2.71 (+19% YOY; $2.31 cons.). The higher estimates reflect roughly $30M in incremental EBIT from the deal, $4M in incremental interest cost and a 37% tax rate (consistent with the current corporate rate). As consistent with other B&G acquisitions, the asset purchase structure will lead to higher free cash flow accretion—we estimate $0.43-0.45/share. Our new price target of $57 is based on our DCF analysis (see page 2) and equates to 20x 2018e EPS."

For an analyst ratings summary and ratings history on B&G Foods click here. For more ratings news on B&G Foods click here.

Shares of B&G Foods closed at $50.47 yesterday.

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