Shares of Cintas gained more than 2 percent in intraday trade Wednesday as analysts upgraded the stock based on its recently announced acquisition of G&K Services.
On Wednesday, Barclays upgraded Cintas to "overweight" from "equal weight" and raised its price target on the stock to $130 from $110. The firm said that while it has "always viewed CTAS as a premium 'Industrials' idea," it has "always looked for M&A as a catalyst to get us over the hump — which we now have with the GK acquisition."
Cintas announced Tuesday that it will be buying all outstanding shares of competitor G&K Services for $97.50 a share in cash. This represents a premium of 18.7 percent from the stock's Aug. 15 close. Including net debt, the deal values G&K around $2.2 billion.
G&K shares were modestly higher in intraday trade.>
Cintas will gain 170,000 "new customers to sell its much broader set of offerings" in addition to being able to leverage "a stronger supply chain, sourcing capabilities & additional processing capacity," according to Barclays.
Both stocks are on a tear this year. Cintas has climbed about 27 percent in 2016, while G&K has surged more than 54 percent in the same period.
Disclosure: Barclays and/or an affiliate is a liquidity provider and/or trades regularly in the securities of this issuer and/or in any related derivatives.Disclaimer