After a Credit Suisse analyst, Gary Balter, suggested a potential merger between GNC Holdings Inc (NYSE:GNC) and Vitamin Shoppe Inc (NYSE:VSI), Jim Cramer has also given positive remarks for the same.
Cramer added, “Three weeks ago a great retail analyst named Gary Balter, over at Credit Suisse, came out with a detailed report explaining why GNC and Vitamin Shoppe should merge.” After considering the odds, he added, “I think it would be a slam dunk.”
According to the findings of Gary Balter, GNC Holdings Inc (NYSE:GNC) could benefit from the acquisition of Vitamin Shoppe Inc (NYSE:VSI). It would offer the company an edge against big-box retailers with a larger presence and customer base. As of now, the company has a target price of $43 from Credit Suisse with consensus price target of $50.09.
Cramer did further research and pointed out that the merger could bring down operating costs and competition for the new company. He said,
“When you look at a map, 100 percent of Vitamin Shoppe’s locations are within a five mile radius of a GNC with 80 percent within a one mile radius.”
Further, both the brands, GNC Holdings Inc (NYSE:GNC) and Vitamin Shoppe Inc (NYSE:VSI), would receive a boost from a merger with significant reduction in promotional costs.
On top of everything else, the new CEO of GNC Holdings Inc (NYSE:GNC), Mike Archibold, was a top-level executive at Vitamin Shoppe Inc (NYSE:VSI) and considering his experience with both the companies, he can definitely make it work, added Cramer. Considering the increasing competition and online stores, this merger might just be the best thing for GNC Holdings. Cramer added, “Over and over again we’ve seen this market reward acquirers for buying key competitors. I think a GNC takeover of Vitamin Shoppe would be no different.”
This article has been written by Prakash Pandey.