Q: A few days ago Caisse stated it will support Atd in acquisition of 7&I. Aritsan,a major shareholder of 7&I encouraged negotiations with Atd instead of reorganization. This resulted in Atd's rise of $1.20. It appears that the Japanese Gov't will block a take over,however it may allow sale of the N.American stores. Atd has dropped quite sharply since initial offer.In view of foregoing,is it timely to buy/add Atd.What is a good entry price? Txs for u usual great services & views
5i Research Answer:
The saga continues. We think if ATD can secure any part of Seven & i it will be able to make it work. But there are US anti-trust concerns as well as the difficulties in Japan. But we think ATD stock looks good with or without the deal. At 17X earnings, it is at the low end of its historical valuation range. It has lots of capacity for other deals if this one fails. 15% EPS growth is expected in 2025 even with no deal. We think $73 would be attractive to buy.