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Failing up: Samuel Adams brewer surges after analyst says struggles could lead to takeover

  • Credit Suisse raises its rating for Boston Beer shares to neutral from underperform, predicting private equity firms or Molson Coors could acquire the company in the future.
  • "In addition, although founder Jim Koch seems determined to turn the business around, we think the likelihood of a takeout goes higher if Samuel Adams rejuvenation efforts ultimately fail next year," the firm's analyst writes.
Samuel Adams lager
John Bohn | The Boston Globe | Getty Images
Samuel Adams lager

Bad news can be good news for Boston Beer shareholders, according to one Wall Street firm.

Credit Suisse raised its rating for Boston Beer shares to neutral from underperform, saying the possibility of a takeout will increase if the company performs poorly going forward.

"We now see a more balanced spread between potential upside and downside scenarios while market sentiment remains overly negative," analyst Laurent Grandet wrote in a note to clients Tuesday. "In addition, although founder Jim Koch seems determined to turn the business around, we think the likelihood of a takeout goes higher if Samuel Adams rejuvenation efforts ultimately fail next year."

Boston Beer shares rose 6 percent Tuesday after the Credit Suisse report. The shares were down 10 percent year to date through Monday versus the S&P 500's 12 percent gain.

Grandet raised his price target for the shares to $150 from $140, representing 2 percent downside from Monday's close.

The analyst predicts the company's Samuel Adams sales will fall 15 percent this year and decline 5 percent in 2018.

"We now think there is a fair probability of SAM being acquired in the next 12-months, increasing significantly by this time next year if Samuel Adams is still suffering," he wrote.

Grandet specifically cited Molson Coors and private equity firms as potential acquirers for Boston Beer.

"We have previously suggested that SAM could make a good target for the likes of Molson Coors or even be a good candidate for a leveraged buyout (currently zero debt) that would take the company private and afford the new management the opportunity to turn the brands around away from the scrutiny of public markets investors," he wrote. "We think Molson Coors would be the most agreeable candidate for Koch to consider buying his company."

The analyst's "blue sky" price target for Boston Beer shares under a takeout scenario is $207 a share.

A Molson Coors spokesperson, when asked for comment, said, "We don't comment on market rumors or speculation."

Boston Beer director of communications Jessica Paar sent the following statement when asked for comment for this story:

"We've seen speculative reports for years, but as a publicly traded company, we cannot comment on rumors or speculation. As our founder and brewer Jim Koch has publicly shared, we're proud to be an independent American company. As a matter of fact, we're so proud of that, we've adopted the Brewers Association's independent craft seal, and are incorporating it onto every bottle and can of beer that we brew."

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