Central Garden & Pet Company
) has received an acquisition offer from
Harbinger Group Inc
). In an unsolicited letter, the diversified conglomerate has made
an offer to acquire all of Central Garden & Pet's outstanding
shares for $10 per share in cash or acquire the company's Pet
segment for $750 million.
The news was enough to provide momentum to Central Garden &
Pet's shares that hit 52 week high of $10.01 as investors welcomed
the development, and closed 6% above the Friday's closing price.
However, not much impetus was noticed in the shares of Harbinger
that managed 1.1% growth on the index.
The $10 per share offer represents a 27.5% premium to Central
Garden & Pet's closing stock price of $7.84 on Jun 6, 2014.
Harbinger Group has also indicated that it will negotiate the deal
value if Central Garden & Pet's board engages in constructive
talks. On the other hand, Central Garden & Pet said it was
reviewing the offer in consultation with its legal and financial
In a publicized letter dated Jun 9, 2014, Harbinger had disclosed
ownership of 4.5% of the company's class A stock and 4.4% of its
total common stock.
Despite being a leading name in the lawn, garden and pet supplies
market, Central Garden & Pet has been facing troubles for some
time now. Lower-than-expected earnings and consistently lower
revenues from the Pet segment remain major concerns for the
company. This has triggered a downward revision in its estimates
over the last 60 days. Estimates for fiscal 2014 and 2015 fell
33.3% and 20.6%, to 28 cents and 50 cents, respectively.
Also, stiff competition and seasonality of the Garden segment have
added to the woes. To mitigate its troubles, Central Garden &
Pet is on an overhauling drive. The company intends to evolve into
an integrated, multi-brand company from a portfolio of stand-alone
businesses, by restructuring and reorganizing operating units and
Currently, Central Garden & Pet has a Zacks Rank #4 (Sell).
Key Picks from the Sector
Some better-ranked retail stocks worth investing include
Prestige Brands Holdings, Inc.
Summer Infant, Inc.
), both sporting a Zacks Rank #1 (Strong Buy).
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CENTRAL GARDEN (CENT): Free Stock Analysis
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