Citi group retierated a buy recommendation on Quiksilver (ZQK) saying “VFC may be close to acquiring skate brand DC Shoes from Quiksilver (NYSE: ZQK), according to WWD reports on Friday. We think this could be a positive acquisition for four reasons:
1) The brand fits well within VFC’s newly created Action Sports Americas coalition, and we think there are opptys to create synergies w/ its Vans & Reef brands, 2) VFC will leverage its global sourcing and distribution to further grow the brand like previous acquisitions; 3) VFC is likely to get an attractive price as a result of market valuations and ZQK’s balance sheet; and 4) We think the deal would be slightly accretive, w/out impacting VFC’s dividend or our est. of ~$200M in repurchases for FY09.”
“Short-Term Potential Positive for ZQK, But Long-Term Impact Uncertain — The possible cash infusion for ZQK is important as the company needs to refinance its short-term debt, including $167 million which is uncommitted, and a $72 million facility due to mature in March 2009. However, with the possible sale of DC, we think Quiksilver could be losing its growth crown jewel.”
Quiksilver is currently up $.75 and VF $1.85 on the day.
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