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TheStreet Open House

Lululemon seen as potential takeover target for VF Corp

Stocks in this article: LULU

NEW YORK ( TheStreet) -- Shares of lululemon (LULU), which specializes in developing yoga attire, are climbing after research firm ISI Group wrote that the company could become a takeover target for apparel maker VF Corporation (VFC).

WHAT'S NEW: VF Corp. operates like a private equity firm and should make one or two "significant" acquisitions every other year or so, ISI analyst Omar Saad wrote in a note to investors earlier. VF Corp. lacks a foothold in the strong and growing performance athletic apparel segment and a merger between the companies would be mutually beneficial because, unlike lululemon, VF has strong brand building and product innovation capabilities, as well as a top notch supply chain, the analyst contended. If VF Corp. acquires lululemon for $50 per share, such a deal could increase the former company's earnings per share by about $1.05 over the long-term, Saad estimated. ISI Group upgraded VF Corp. to Buy from Neutral and raised its price target on the stock to $75 from $65.

WHAT'S NOTABLE: ISI also listed Puma and Lands' End (LE), which was recently spun-off of Sears (SHLD), as other potential takeover candidates for VF.

PRICE ACTION: In mid-morning trading, lululemon advanced $1.29, or 2.9%, to $46.06, VF Corp. gained 94c, or 1.5%, to $63.75, and Land's End edged up 0.7% to $27.13.

Reporting by Larry Ramer.

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