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Strategies & Market Trends : Speculating in Takeover Targets
CTG 8.410+0.7%Sep 24 4:00 PM EDT

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From: E_K_S10/27/2020 4:49:13 PM
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Why B&G Foods Is Buying the Crisco Brand and What It Might Mean for the Stock -- Barrons.com

Why B&G Foods Is Buying the Crisco Brand and What It Might Mean for the Stock -- Barrons.com

Dow Jones

By Teresa Rivas

B&G Foods said Tuesday it is buying the Crisco brand from J.M. Smucker, sending its shares higher in midday trading.

B&G (ticker: BGS) said it would acquire the oil and shortening business for $550 million in cash, in a deal that is slated to close next year.

The deal will bring Crisco into a portfolio that already includes some cooking and baking products. B&G may be best known for its frozen-food business -- its Green Giant vegetable brand accounted for nearly 22% of its sales in 2019 -- but it also owns Baker's Joy nonstick baking spray and Clabber Girl baking powder. Crisco is the leading brand of both shortening and vegetable oil, B&G noted in the news release.

Cooking and baking products have gotten a lift from the Covid-19 pandemic, with people spending more time at home and experimenting with new foods as they look to save money and eat healthier.

B&G stock was up 4.1% to $29.04, while J.M. Smucker (SJM) was off 0.9% to $114.05. The Dow Jones Industrial Average was down 0.4%.

Some analysts are upbeat about the deal. Piper Sandler's Michael Lavery, who has an Overweight rating on the shares, thinks the purchase "looks highly accretive...[as] Crisco can help build B&G's scale in baking products," and could lift the company's earnings per share by 50 cents to 55 cents in 2021.

RBC Capital Markets' Nik Modi has a Sector Perform rating on B&G but lifted his price target to $32 from $30, citing the acquisition. He views it as a positive, "leaning in to expectations at home food trends will remain elevated in a post-Covid world."

Credit Suisse's Robert Moskow, however, took a more-measured approach. He lifted his price target by $1, to $28, and wrote that Crisco is a good fit for B&G's portfolio. However, he reiterated a Neutral rating. He thinks consumers will continue to cook and bake more at home, even post-pandemic, but warned that Crisco was experiencing steady declines before Covid, "from consumers shifting to healthier oils and private label."

"Of the companies geared toward at-home food consumption, we prefer the ones with strong brand equity and a good track record for reinvesting behind them," he wrote, citing McCormick (MKC) and General Mills (GIS).
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