SunTrust Says Dave & Buster's (PLAY) LBO is 'Feasible', Could Be Worth Upper $50s in Deal
SunTrust analyst Jake Bartlett reiterated a Hold rating and $42.00 price target on Dave & Buster's (NASDAQ: PLAY), saying an LBO is 'feasible' after KKR reported a stake.
The analyst commented, "We have long viewed an LBO as a possibility for PLAY (see, our note "LBO Math Should Provide Valuation Floor", published 1/18/18), which has supported valuation, even as fundamentals deteriorated. This morning, KKR disclosed a 10.7% economic interest (6.3% equity and 4.4% forward contracts) in PLAY, stating that they "have and intend to continue to engage in discussions with management or the board of directors". We believe KKR's activist position makes an LBO transaction more likely and our math suggests it could be an attractive target, at a high-$50/share price, representing a 25-30% premium from current levels (40-45% higher than yesterday's close). At this early stage, we are not adjusting our HOLD rating or $42 PT."
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Shares of Dave & Buster's closed at $42.04 yesterday.