Central Garden & Pet Company’s (CENT) board of directors rejected the acquisition offer from Harbinger Group Inc. In Jun 2014, Harbinger Group through an unsolicited letter made an offer to acquire all of Central Garden & Pet’s outstanding shares for $10 per share in cash or the company’s Pet segment for $750 million.
However, Central Garden & Pet’s board unanimously thwarted both the proposals citing them as not in sync with the company’s growth plans. The company maintains that it is making all the necessary efforts to pull itself out of troubled waters and reinstate on the growth trajectory. The company sought legal advice for decision making from Cravath, Swaine & Moore LLP, whereas Lazard served as the financial advisor.
Despite being a leading name in the lawn, garden and pet supplies market, Central Garden & Pet has been facing difficulties for some time now. Lower-than-expected earnings and consistently lower revenues from the Pet segment are its major concerns. In the trailing four quarters, the company has missed the Zacks Consensus Estimate by an average of 9.9%.
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 to evolve into an integrated, multi-brand company from a portfolio of stand-alone businesses.
The company intends to have a balanced approach that encompasses revenue growth as well as cost reduction. It also intends to launch several products that appeal to customers and also to upgrade its customer service. Management expects its ongoing transformation efforts to yield results, though not linear, and expects the one-year window to gain maximum momentum.
Currently, Central Garden & Pet has a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some better-ranked retail stocks worth investing include Jarden Corp. (JAH), Prestige Brands Holdings, Inc. (PBH) and Spectrum Brands Holdings, Inc. (SPB). Jarden sports a Zacks Rank #1 (Strong Buy), whereas Prestige and Spectrum Brands are Zacks Rank #2 (Buy) stocks.
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