Q: If ATD is successful in the Seven & i Holdings takeover, it is likely to have to do so at the current bid or higher (eg $50B). What do you expect the stock price reaction will be in the near, mid, and long term should they be successful in their efforts, even at the current 47B? In addition, what do you expect to be the effect on their balance sheet (eg a ton of new debt etc)?
5i Research Answer:
With a successful deal, we would expect a muted stock reaction in this type of market backdrop. In the mid term, likely a decent gain as investors realize ATD knows how to make a good acquisition. Longer term, we would expect ATD to get back to its usual historical strong outperformance. ATD can handle the size of the deal but we would expect a combination of debt and equity. Debt may be a concern for a period of time, especially if rates rise if inflation becomes a concern again.