Dj Correction To Unifirst Stock Is Up 40% On $5.3 Billion Takeover Offer - Barrons.Com

Karishma Vanjani

UniFirst shares are surging in response to news that Cintas, a competitor in manufacturing work uniforms, has made an offer to acquire the company, valuing it at $5.3 billion.

Cintas, which offers first aid and safety and other uniforms, is proposing to pay $275 per share for all of UniFirst's outstanding common and Class B shares. The stock closed at $169.33 on Monday, implying a 62% gain in the price.

The stock rose in premarket trading after The Wall Street Journal reported that Cintas had made the offer. Cintas confirmed the news shortly before the market opened, saying that while the offer was delivered to UniFirst on Nov. 8, its board has refused to meet despite repeated attempts by Cintas to have a collaborative discussion.

UniFirst didn't respond to a request for comment.

In the past three years, UniFirst has rebuffed Cintas' offers twice. Investors now seem to believe the deal may go through: UniFirst's stock surged 44% to more than $243.7 after the market opened.

Corrections & Amplifications: Cintas has tried to buy UniFirst in the past. A caption on an earlier version of this article incorrectly said UniFirst has tried to buy Cintas.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(11:58 GMT) Unifirst Price Target Raised to $235.00/Share From $190.00 by UBS

Consumer stocks increased late Wednesday afternoon, with the Consumer Staples Select Sector SPDR Fund (XLP) up 0.1% and the Consumer Discretionary Select Sector SPDR Fund (XLY) adding 0.3%.

In corporate news, Hershey is seeking permission from the US Commodity Futures Trading Commission to buy more than 90,000 metric tons of cocoa on ICE Futures US, Bloomberg reported. Hershey shares were down 2%.

UniFirst shares rose over 4% after the uniform rental company reported higher fiscal Q1 results.

Albertsons' fiscal Q3 earnings came in ahead of Wall Street estimates, but revenue missed expectations. The grocery chain also raised its full-year bottom-line outlook despite a cautious consumer environment. Its shares were up 0.1%.

Cal-Maine Foods shares climbed 1.3% after the egg producer's fiscal Q2 results increased year over year, driven by robust demand for shell eggs and higher prices.

UniFirst reported higher fiscal first-quarter results annually but costs related to certain projects weighed on earnings, while the uniform rental company trimmed the top end of its full-year sales outlook.

Net income came in at $2.31 per share for the quarter ended November, up from $2.26 the year before. Three analysts polled by FactSet expected $2.09. Sales increased 1.9% to $604.9 million, compared with analysts' $606.6 million estimate.

The company said Wednesday it incurred about $2.5 million in costs linked to its customer relationship management computer system and enterprise resource planning projects, resulting in a $0.09 headwind to EPS. Total operating expenses rose to $549.4 million from $540.4 million in the prior-year quarter.

"We are pleased with the results from our first quarter, which represent a solid start to our fiscal year and were largely in-line with our expectations," Chief Executive Steven Sintros said during an earnings call, according to a FactSet transcript.

On Tuesday, larger uniform supplier Cintas went public with its attempt in November to acquire UniFirst in a potential all-cash offer worth roughly $5.3 billion, which was rejected by UniFirst. Cintas proposed to buy UniFirst for $275 per share in cash, saying the price reflected a 46% premium relative to the latter's 90-day average price as of Monday.

During the earnings call, Sintros reiterated UniFirst's statement from Tuesday that the company's board determined the proposal wasn't in the best interests of the group and its investors.

"We believe a potential combination could be highly accretive but initial opposition from UNF's controlling shareholders (founding family) may make it difficult to get a transaction over the finish line," Truist Securities said in a report. "Our sense is that a potential transaction could also face antitrust scrutiny."

Revenue for the core laundry operations segment, in which the CRM and ERP projects' costs were recorded, rose 1.7% year over year to $532.7 million in the first quarter. "As the market has emerged from a period of significantly elevated inflation levels, a more challenging pricing environment has developed, which has had a corresponding impact on our retention rates," Sintros said on the call. "This has impacted our overall growth in our core laundry operations."

Sales in the specialty garments business improved 2.9% to $45.9 million, buoyed mainly by growth in the European and North American nuclear operations, partially offset by a decrease in cleanroom operations, according to the company.

For fiscal 2025, UniFirst now expects revenue to come in between $2.425 billion and $2.44 billion, lowering the top end of the prior outlook from $2.445 billion, Sintros said in a statement. The company reiterated its EPS forecast of $6.79 to $7.19 for the year. Three analysts surveyed by FactSet estimate GAAP EPS of $6.98 and sales of $2.43 billion.

The guidance continues to include an estimated $16 million of costs related the CRM and ERP projects, Sintros said.