Barclays sees 40% chance of rival bid for Whole Foods

19 June 2017

(ShareCast News) - Analysts at Barclays revised their target price on shares of Whole Foods higher even after it agreed to be bought over by, arguing there was a fair chance that a more enticing offer would be forthcoming.
Although Amazon's deep pockets were hard to match for any rival, "many will do anything to either make this acquisition more costly for Amazon or prevent the assets from landing in Amazon's lap," analyst Karen Short said in a research note sent to clients on 16 June.

In anticipation of a looming bidding war, Short revised her target price for Whole Foods's shares from $38 to $48.

Her new target was the result of combining her 'upside' scenario, which contemplated a 'take-out' multiple of nine times EBITDA for a price $57 a share, and a downside scenario of $42 per share, should's current offer finally prevail.

The probability attached to the first scenario was 40% and that for the latter 60%.

Regarding the second one of those two scenarios, Short explained that there was little risk that a tie-up between Home Foods and might run afoul of the regulator.

The analyst also revised her recommendation on Amazon's shares from 'equalweight' to 'overweight'.

"Other potential bidders: In theory, all retailers that sell food and compete with AMZN because we think most have too much to lose not to bid. As a result, the potential universe of bidders could include Kroger, Target and Wal Mart to name a few."