A report from Credit Suisse suggested a merger in the vitamin sector would generate tailwinds.
"Three weeks ago a great retail analyst named Gary Balter, over at Credit Suisse, came out with a detailed report explaining why GNC and Vitamin Shoppe should merge," Jim Cramer explained
And after sifting through the details and metrics, the "Mad Money" host couldn't agree more
"I think it would be a slam dunk," he said.
First and foremost it would reduce competition. Also Cramer said it would generate synergies by allowing the new company to eliminate overlapping costs. "When you look at a map, 100 percent of Vitamin Shoppe's locations are within a five mile radius of a GNC with 80 percent within a one mile radius." After a merger, that wouldn't be necessary.
In addition, "If GNC acquires Vitamin Shoppe, they could combine their websites, share strong proprietary brands, and decrease the promotional price-cuts on third party merchandise," Cramer added.
And Cramer thinks the timing may be particularly good because GNC's new CEO, Mike Archibold, was formerly a top-ranking executive at Vitamin Shoppe. "If anyone could make this merger work, he can," Cramer said.
All told, Cramer thinks a merger makes all the sense in the world. And he believes it would be embraced by the Street.
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"GNC currently trades at just 12 times earnings, but this deal would deliver a dramatic boost to the company's results. In turn, I bet the market would reward GNC with a substantially higher multiple. I want to thank Gary Balter at Credit Suisse for pointing out how much sense a GNC/VSI deal would make," Cramer said.
"Over and over again we've seen this market reward acquirers for buying key competitors. I think a GNC takeover of Vitamin Shoppe would be no different."
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