Vizio falls amid Capri deal block; new short idea at Hedgeye

Vizio (NYSE:VZIO), which agreed to be sold to Walmart (WMT) in February, dropped 1.8% after a judge’s blocked Tapestry’s (TPR) $8.5 planned purchase of handbag competitor Capri Holdings (CPRI).

Vizio (VZIO) was also added as a new short idea at Hedgeye in the wake of the judge’s ruling against the combination.

“Given the asymmetric opportunity and how hostile this administration has been in blocking deals (see Tapestry/Capri as the latest example), and the fact that it’s been ~8-months from the deal announcement and Walmart/Vizio still haven’t cleared the HSR hurdle – we are going to take the shot,” Hedgeye analyst Andrew Freedman wrote in a note on Friday.

Walmart (WMT) agreed in February to acquire TV maker Vizio (VZIO) for $11.50 per share in cash, which works out to a fully diluted equity value of approximately $2.3 billion. In late April, Vizio and Walmart disclosed that they received a request for more information about the retailer’s planned acquisition from the Federal Trade Commission.

“The more time that goes on, the higher the probability that a deal does not happen per the agreed-upon terms in the Merger Agreement,” Freedman added.

If Hedgeye’s wrong on its call, there’s 2.5% downside risk, Freedman wrote. If the deal falls apart, there’s over 30% downside opportunity for the short. Shares of Capri (CPRI) holdings plunged 48% on Friday after the judge’s decision.

CTFN reported earlier this month that Walmart (WMT) and the TV maker Vizio are targeting a mid-November close, though the FTC is still reviewing the deal. Vizio (VZIO) and Walmart were internally targeting an October close, but the timeline has changed.