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Panera Buyout Speculation No Surprise

Panera Buyout Speculation No Surprise

Shares of narrow-moat Panera are soaring on rumors that the firm is exploring potential strategic alternatives after receiving preliminary takeover interest. While it's difficult to handicap the likelihood of a transaction it's not hard to see why a suitor would be interested. In our view, Panera is one of the restaurant operators best equipped to accommodate evolving consumer expectations regarding value, convenience, health, and technology.

In addition, there has been an uptick in industry M&A activity the past two months, including Restaurant Brands' acquisition of Popeyes, Darden's proposed acquisition of Cheddar's, and a spate of private equity transactions. An April 3 Bloomberg article cited Caribou parent JAB Holdings, Starbucks, and Domino's as potential bidders.

There is no change to our $260 fair value estimate based on these rumors; our valuation is based strictly on Panera's longer-term stand-alone cash flow.That said, we would not be surprised to see M&A speculation keep the stock ahead of our fair value estimate for the foreseeable future.

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About the Author

RJ Hottovy

Sector Strategist
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R.J. Hottovy, CFA, is a consumer strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He is responsible for consumer discretionary and staples research. He has covered the consumer sector as an analyst and director of global consumer equity research for Morningstar since joining the company in 2008, and specializes in a broad range of consumer categories including restaurants, footwear and apparel retailers, consumer electronics retailers, fitness clubs, home improvement and furnishing retailers, and consumer product manufacturers.

Before joining Morningstar, Hottovy was a director and senior stock analyst for Next Generation Equity and an analyst for William Blair & Co., specializing in a wide range of retail and consumer product companies. He also spent two years at Deutsche Bank, covering waste management, water utilities, and equipment rental stocks.

Hottovy holds a bachelor’s degree in finance and a second degree in computer applications from the University of Notre Dame, where he graduated magna cum laude. He also holds the Chartered Financial Analyst® designation and is a member of the CFA Institute and the CFA Society of Chicago.

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