Jim Cramer of CNBC called Charlotte-based Snyder’s-Lance’s acquisition last week of Diamond Foods “a brilliant combination” that could itself become an attractive takeover target.
Shares of Snyder’s-Lance are “absolutely worth buying now that they are rolling up Diamond,” the “Mad Money” host said Friday. The two companies are complementary, so Snyder’s is grabbing a lot more aisle space with the transaction, Cramer added.
Cramer had recommended San Francisco-based Diamond as a “dramatically undervalued” turnaround story this past summer and since then, the stock has risen 29 percent, CNBC reported.
Cramer said despite American consumers’ current penchant for healthier foods options, they still like to indulge on junk food.
The local snack maker’s $1.91 billion deal is expected to close in early 2016. Snyder’s said last week it anticipates annual cost savings of $75 million, and that the deal will boost its earnings in 2016.
“I think acquiring Diamond is exactly what Snyder’s-Lance needs in order to reignite its growth, and the positives from this transaction far outweigh the negatives from this suboptimal quarter,” Cramer said.
Last week Snyder’s-Lance reported third-quarter earnings that were up from last year but that fell below Wall Street expectations as sales softened.
The combined Snyder’s-Diamond “snack food powerhouse” would make an equally attractive takeover target once the deal closes, Cramer said, naming Mondelēz, PepsiCo and Coca-Cola as possible acquirers.
Snyder’s-Lance, known for its Lance peanut butter sandwich crackers, has been expanding its portfolio of “better-for-you” snacks as consumers have been demanding healthier snacks. Diamond’s product line includes Kettle Brand chips, Pop Secret popcorn and Emerald snack nuts.
Diamond Foods has been beset by an accounting scandal in which it falsified walnut costs to inflate its earnings, later making the company vulnerable as a takeover target.