Fairway Group Likely To Beat On Bottom Line EPS - Strong Acquisition Candidate

Additionally, Fairway has strong name recognition in the New York City area, a strong and long storied history, and is household branded. We expect both Whole Foods and especially Kroger to make a play for Fairway long before the company is profitable again.

Obviously the greater risk here is that these and other companies would have no interest in buying Fairway, and continued losses which could possible cause Fairway to engage in less-than-favorable financing.

We would remark that Solta, a company we predicted would be acquired in 2013 (which it was) was in even greater trouble, and that one fetched a 50% premium in its sale to Valeant.

Fairway has its stores perfectly located for a Whole Foods or Kroger to go in and make profitable in a much shorter time frame, not withstanding enjoying a potential $400M write-off due to losses racked up by Fairway over time. Again, this is not unlike Solta's assets being taken up by Valeant.

Our sources when it comes to M&A activity are usually right on, and they tell us that Fairway is indeed in play -- we shall see!

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Disclosure: Long FWM.

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