Not meaning to offend anyone, I think $6 might be excessive at this juncture in time. You are basing this number on an expected $5 price level next year, but IMO a premium would be based on not that number but the actual recent high of about 4 1/4. I'm thinking that if we were to have been offered $5.25 - $5.50, we really wouldn't have had a whole lot to complain of. Part of the analysis on this thread was based on continuing revenue and earnings growth of >30%. While I think that we could very well see such a number sustained for a year or two, one does think that an expected annual growth rate in these areas over the next five years to be perhaps more realistic at closer to 20%. Even w/ 20% growth, the acquisition value would be at a good premium over Monday's close.
Somebody pointed out here that DRNK's revenues and earnings were a drop in the bucket to TRY. If so, one does wonder why they'd bother w/ the acquisition. The answer, I believe, is that TRY is working very hard to build a solid beverage line. The one significant hole they had in their line was a good root beer offering, hence their interest in Stewart's. This was confirmed to be perhaps the major attraction of DRNK by Amy Bolding during our phone conversation yesterday.
But I think that mgmt. sells the co. and us short in partially giving it away. There are some players out there who do not have major root beer offerings out there either, such as PepsiCo, who is looking into several paths to create an expanded beverage line that would take away market share from Coca Cola's offerings.
One possible explanation in mgmt.'s hasty decision might be found in my conversation w/ Ms. Bolding. As we have read in prior news releases that DRNK had recently signed major distribution pacts w/ Snapple distributors in the New York area, the co. was seeing its distribution channel expand. But w/ TRY's acquisition of the Snapple line and w/ their search for a root beer brand, going w/ another root beer may have left DRNK out in the cold. In saying this, I asked Amy if that meant that mgmt. felt they maybe had a gun to their head in that they needed to act now, she quickly backed away from her line of discussion. Is this a factor in why mgmt. has done what they've done? I think it's quite possible. |
