The Bubs Australia Ltd (ASX: BUB) share price has been a strong performer on Monday.
In afternoon trade, the struggling goat milk focused infant formula company's shares are up 7% to 44 cents.
Why is the Bubs share price up 7% on Monday?
The catalyst for the rise in the Bubs share price on Monday has been speculation that one of its rivals might be taken over.
The A2 Milk Company Ltd (ASX: A2M) share price is currently up 14% after The Australian suggested that global food giant Nestle was lining up a takeover approach.
The report indicates that Nestle may be waiting for the release of the company's full year results next week before deciding whether to make a move or not.
However, this isn't the first time that The Australian has suggested a takeover approach was coming. In April it said the same and no offer was tabled.
Could Bubs be a takeover target?
While you cannot rule anything out, especially given the heightened M&A activity, it is worth noting that A2 Milk and Bubs are two very different beasts.
On one hand, you have A2 Milk which is a highly profitable company going through a very difficult period largely because of COVID-19.
And on the other hand, you have Bubs which has consistently failed to live up to expectations and makes a heavy loss. In fact, during the last quarter, Bubs revealed yet again that it spends more on manufacturing and marketing its products than it receives from the sale of them. This resulted in another quarter of cash burn.
Bubs also doesn't have a recognisable brand like A2 Milk and little by way of a unique selling point. This arguably doesn't make it anywhere near as attractive a takeover target as A2 Milk.
Even after today's strong gain, the Bubs share price is down 54% since this time last year.
