Cintas-UniFirst deal spread widens on FTC scrutiny: Bernstein

Investing.com -- In a note to clients on Wednesday, Bernstein flagged growing market concern over Cintas's proposed acquisition of UniFirst, as regulatory scrutiny widens the spread between the two stocks.

Analyst Connor Cerniglia, who rates Cintas at Market Perform with a $200 price target, said the market-implied odds of the deal's approval have fallen to about 70% from roughly 85% on Aug. 25.

UniFirst shares dropped 7% over that period, while Cintas fell just 2%, leaving the business services company's stock up about 18% since the start of July.

Cerniglia pointed to two main drivers of the sell-off. The first was a report that the Federal Trade Commission had issued "expansive" civil investigative demands to third-party industry participants as part of its merger review.

While such demands are routine, he said the "expansive" description suggested broader-than-usual outreach, and the sell-off accelerated around that news.

The second was an independent 160-page industry report from Uniform Bright, prepared for submission to regulators, which skeptics argue could give the FTC, the Justice Department and state attorneys general ammunition against the deal.

Management continues to expect the transaction to go through, with Cintas due to complete its response to the FTC's second request between September and November, Cerniglia said.

He stressed that approval remains the base case but noted the market now implies about a 30% chance of failure, which is considered "a risk worth monitoring."

Bernstein believes the deal is constructive for Cintas over the long term and will likely close in early 2027.

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