NEW YORK (AP) -- Smart Balance Inc.'s stock climbed on Monday as an analyst upgraded the company's rating and price target, saying its buyout of gluten free foods maker Udi's Healthy Foods LLC will help with its growth.
THE SPARK: Smart Balance, a healthy food and beverage company, said on Friday that it is buying Udi's for $125 million in cash. Smart Balance, which sells buttery spreads, cooking sprays and other products, bought another gluten-free food maker, Glutino, in August. The Paramus, N.J., company said Friday that its Udi's purchase would diversify its portfolio of health and wellness brands while positioning it as a leader in gluten-free foods.
THE ANALYSIS: Canaccord's Scott Van Winkle boosted Smart Balance to "Buy" from "Hold" and increased its price target to $8 from $6.50. The analyst said in a client note that the Udi's deal will help Smart Balance's business as it looks to strengthen its position in the health foods market.
Amit Sharma of BMO Capital Markets also feels that the buyout will benefit Smart Balance.
"We believe that the acquisition represents an important step in Smart Balance's transformation into a well-diversified, faster growing company with increasing exposure to gluten free and likely other nontraditional food segments," the analyst wrote.
Sharma reaffirmed a "Market Perform" rating and $6 price target.
SHARE ACTION: Shares of Smart Balance rose 53 cents, or 8.7 percent, to $6.60 in morning trading. The stock has traded in a 52-week range of $4.47 to $7.15.