Finance CREDIT SUISSE: A takeover won't save Buffalo Wild Wings (BWLD)

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Buffalo Wild Wings popped more than 20% on reports of a takeover offer from Roark Capital Group. But the company's future isn't clear-cut.

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(Buffalo Wild Wings on Facebook)

  • Buffalo Wild Wings popped more than 24% on reports of a takeover offer from Roark Capital Group.
  • But the company's future isn't clear-cut, even if the takeover goes through.
  • The price of chicken wings is at historic highs and is the root of deeper problems at the company.
  • Watch Buffalo Wild Wings' stock price move in real time.


Buffalo Wild Wings has been struggling lately, with the stock falling 5.43% in the last year. But on Monday, reports that the company had received a $150 per share takeover offer from Roark Capital Group sent shares soaring by more than 24%.

For investors, a takeover could mean the start of a turnaround for the company, but Jason West, an analyst at Credit Suisse, thinks the company's future is largely out of its own hands.

"Key risks include failure of the acquisition, competitive discounting, and wing price trends," West wrote in a note to clients.

Even with the potential for a $2.3 billion takeover offer from Roark Capital, the restaurant still has to sell a lot of wings with attractive margins to turn a profit. The company called the price of chicken wings "historically high" in its third-quarter earnings results, and announced that it would be ending its popular half-price wings promotion due to the rising costs.

If Roark Capital completes a takeover of BWW, it could be in the perfect place to pick the new CEO, and usher in a new plan to turn around the company, West said. Roark could be in the position to recover about $1 per share in earnings power, but only if "wing costs return to historical norms over time." But it's hard to predict when chicken wing prices will drop, and current prices could be a new normal, West said.

The decline at Buffalo Wild Wings isn't totally dependent on the price of chicken wings. The entire casual dining sector has been hurting, which West said is just another reason the company could continue to slip despite a takeover.

West remained neutral on the company and has a price target of $120, which is about 17% lower than the company's current price of $148.55.

Read more about the reported takeover offer.

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