Shares of Celsius Holdings (CELH) are soaring 32% higher in premarket trading on Friday after the energy drink maker beat Wall Street expectations on the top and bottom line and announced an acquisition.
Although sales were down 4% year-over-year in the fourth quarter, they handily outpaced analyst forecasts. Adjusted earnings per share also fell short of last year’s performance, but they came in well above estimates.
What investors really focused on, however, was the announcement Celsius was acquiring rival Alani Nu in a $1.8 billion acquisition.
Celsius Holdings was able to turn in a stronger than expected performance in the fourth quarter because it has been increasing its retail points of sale. The energy drink maker relies upon partnerships, such as the one it has with PepsiCo (PEP), to expand distribution.
While investors weren’t anticipating much heading into the earnings release, due to lackluster performance in recent quarters, the strength of its numbers in overcoming analyst projects sent CELH stock higher in aftermarket trading Thursday.
What really ignited the stock, though, was news of the Alani Nu purchase.
The deal says Celsius will pay $1.28 billion in cash, $25 million in potential earn-out payments if milestones are reached, and $500 million in CELH stock. Celsius will finance the deal with $900 million in debt and the rest with cash and stock.
Alani Nu is a fast-growing energy drink maker that is now the fourth largest behind Red Bull, Monster Energy (MNST), and Celsius. With only a 3% to 5% share of the market, it only has about half the share of Celsius, which apparently motivated the drink maker to buyout the competition to maintain its own positioning.
CELH stock has fallen sharply over the past year on sluggish sales with shares down 60%. Even if the gains hold, Celsius will still be 66% below the $99 per share peak it hit last May.
