Naked Wines acquisition opens up Majestic's growth potential, says Investec

10th Apr 2015 09:45

Majestic Wine's share price weakened on Friday after the announcement that it will buy rival Naked Wines for £70m, though analysts at Investec hailed the deal, saying it will open up the retailer's growth potential.As well as improving Majestic's prospects for its core UK business, the addition of Naked provides a "capital-light route into international markets", the broker said.Investec, which upgraded the stock from 'hold' to 'buy', said the additional appointment of Naked Wine's boss Rowan Gormley as Majestic's new chief executive, will also give the business a boost."The acquisition of Naked Wines, the international online wine business, represents the sort of radical thinking we were hoping would come out of the strategic review and gives Majestic growth opportunities beyond the UK," Investec said.The broker said Naked is a complementary business being acquired at an attractive price, with £70m valuing it a 0.9 times sales."We expect Mr Gormley to look to unlock Majestic's online potential, improve its customer relationship management, leverage its store network distribution and moderate store roll-out plans," it said.The broker lifted its target price from 350p to 360p for Majestic's shares, which were down 4% at 305p by 10:34.