NEW YORK (TheStreet) -- Shares of Central Garden & Pet Co. (CENT - Get Report) are slightly lower in heavy trading volume this afternoon after it was reported that Philip Falcone's $1.1 billion bid for the marketer and producer of branded products may look like just another prospective M&A deal, but there is a twist: the company is technically takeover proof, the Financial Times reports.
By taking his case directly to CG&P shareholders, Falcone, CEO of Harbinger Group (HRG - Get Report) faces a company in which power is concentrated in the hands of the company's founder and chairman, Bill Brown, who holds 55% of the voting rights with only 12.5% of the equity shares, the Times said.
Harbinger on Monday made public a $10 a share cash offer for CG&P after failing to privately agree on a deal with Brown and his board.
Harbinger shares are up 0.85% to $13.12.
TheStreet Ratings team rates CENTRAL GARDEN & PET CO as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate CENTRAL GARDEN & PET CO (CENT) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CENT's revenue growth has slightly outpaced the industry average of 1.5%. Since the same quarter one year prior, revenues slightly increased by 0.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to -$90.05 million or 32.85% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 3.53%.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Household Products industry and the overall market, CENTRAL GARDEN & PET CO's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for CENTRAL GARDEN & PET CO is currently lower than what is desirable, coming in at 31.26%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.16% trails that of the industry average.
- You can view the full analysis from the report here: CENT Ratings Report