Bernstein sees Hershey as ‘most suitable’ buyer of Simply Good Foods

Bernstein performed an accretion-dilution analysis for General Mills (GIS) and Hershey (HSY) in the scenario that either company acquires Simply Good Foods (SMPL). The firm thinks Hershey is the “most suitable acquirer” for Simply Good Foods. A sizable portion of Simply’s portfolio is snack bars, treats and to a lesser extent, shakes, which could make it a good strategic fit for Hershey who has already made initial inroads into the snack bar category with the acquisition of One Brands in 2019, the analyst tells investors in a research note. General Mills is also a potential suitor, given its below average leverage and vocal commentary prioritizing acquisitions, although antitrust issues in snack bars could be an issue, says Bernstein. The firm believes that while Mondelez (MDLZ) would be a “clear strategic fit,” its purchase of Clif bar likely raises antitrust concerns, while Conagra’s (CAG) leverage would be stretched if it pursued a deal. The analyst estimates a fair buyout price target for Simply Good is $45-$50 per share. Bernstein keeps an Outperform rating on the shares with a $49 price target.