First off I know Grocery Store may be the least sexy industry ever. However, the current share price of ACI is roughly $19.75 and the merger sale price is 27.25. Assuming the merger goes through that's a 37.97% gain if the merger goes through. However, I see even more potential if the merger fails. A potential of 81.77% gain in a base case. The down side I see is the fact that the stock is probably going to slowly go down over the next few months until the merger decision goes through. There may be a slight uptick coming up on august as the merger trial begins. Merger goes through: I think this is the less likely case and most people are assuming an incredibly 90%+ chance of the FTC denying this merger but, I think there is some fair reasoning why it might. 1) Walmart is huge. It holds so much market share the merger will still hold less than half of Walmart's market share and the merged company will be just slightly larger than Costco's market share. 2) The companies largely operate in different areas of the U.S. and have been working toward divesting certain stores where the competition would be stopped. Merger gets Denied: Probably more likely but, possibly the better outcome for investors. I've done a dcf and get a bear case of roughly $24, a base case of roughly $36, and a bull case of $60. I think since the merger began the company has been letting a lot of extra weight off and making the company more profitable. The companies share price is held down from the merger and the large amount of debt they took on to make the large dividend payment a year ago. The company however has shown it can handle the debt really well and are moving in a great direction. I'm not exactly sure what I'm missing because I'm seeing such a good win/win scenario but wanted to see if anyone has any thoughts.
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