SodaStream (SODA) Surges on Rumors of Going Private - Analyst Blog

Shares of SodaStream International Ltd. ( SODA ) jumped almost 10% on Thursday on news that it plans to divest itself for $40 per share to a private buyer.

A Bloomberg report claimed that the Israel-based manufacturer of household soda machines is in talks with an investment firm to go private - citing unnamed sources. According to the report, the deal values SodaStream at $828 million or $40 per share, which represents a premium of 38% on Wednesday's closing price.

Investors in general believe that the deal will not materialize. Many of them have pointed out that the purchase price of $40 per share is far below the price at which SodaStream traded only last year. The company's share price has fallen around 34% year-to-date in 2014 on unimpressive quarterly results. Bloomberg also reported that the deal is not final and may not materialize at all.

It is not the first time that SodaStream's shares have jumped on rumors of selling its equity stake. In April, the stock made headlines after an Israeli news website stated that the company was in talks to sell as much as 16% stake to a major buyer. It was being speculated that the partner will be a big beverage maker, allowing SodaStream to compete more effectively in this ultra-competitive space. The Israeli website noted that SodaStream was in talks with PepsiCo ( PEP ), Dr Pepper Snapple Group, Inc. ( DPS ) or Starbucks Corporation ( SBUX ).

In fact, when cola giant, The Coca-Cola Company bought equity stake in Keurig Green Mountain earlier this year, there were rumors that SodaStream may enter into a similar collaboration with Coca-Cola's rival, Pepsi.

The Zacks Rank #4 (Sell) company is due to report its second-quarter results later this month. The Zacks Consensus Estimate for earnings stands at 32 cents. The company has been seeing soft sales in the U.S., which accounts for about 30% of its revenues, due to difficult retail environment.

In the last reported quarter - first-quarter 2014 - sales declined in the Americas due to elevated inventory levels at retail customers due to weak holiday sellout in the December quarter. Also, difficult year-ago comparisons hurt sales in the reported quarter.

Management is striving to reinvigorate the U.S. business with a focus on reaccelerating the soda maker's growth by improving marketing execution and increasing retail presence.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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