Analysts question shareholder view on acquisition bids for Nutreco

But commentators such as Wilco Jiskoot, a former dealmaker at ABN AMRO, in an interview with Dutch newspaper De Telegraaf, say such an action by Nutreco would be highly risky. 

He is surprised about the appeal from APG, which has about a 10% stake in the Dutch feed group, to allow Cargill exercise due diligence so the agri-business giant could then make a concrete offer. 

Jiskoot told the Dutch media outlet that asking for insight into the books of a competitor, without a serious proposal being made, is really not done.

Linklaters based lawyer, Jan Willem Boer, agrees. He told De Telegraaf: “Cargill has not made a serious bid; Nutreco is entitled to refuse to open the books.”​ ​

Bidding war ​

Last month saw family investment firm, SHV, put in an initial offer of €40 per share for Nutreco. Then, Cargill, in a joint effort with private equity firm Permira, tried to trump that bid with an 'offer' on 8 November of €43.20 a share for the Amersfoort based feed company.

The Minneapolis headquartered group said it was exploring a deal whereby it would acquire the fish feed business and Permira would take on Nutreco’s animal nutrition activities.

SHV subsequently raised its offer to €44.50 a share in response to the competing acquisition interest.

Nutreco management have rejected the approach from Cargill.

“​The fact is that Cargill hasn’t made a bid. There was only an expression of interest, not concrete and precise, with the intention to break up the company. That is fundamentally inconsistent with the long term strategy of Nutreco and not in the interest of all its stakeholders. There was only one bid and SHV has decided to increase that to €44.50. Both boards have decided to support that bid,” ​said a spokesperson for Nutreco. 

Fair valuation ​

That spokesperson told this publication the SHV valuation of Nutreco, even the one based on the original €40 offer, is a fair one. 

“At 9.6 x EBITA, it would be a good multiple, compared with the Cargill Provimi deal in 2011 which came in at 9.3 x EBITA and the acquisition of EWOS by Bain and Altor in 2013, which was also a 9.3 multiple. ​ ​

If we adjust the multiple with the divestment of Nutreco’s lower margin Iberian compound feed and meat business, we calculate an implied multiple for the animal nutrition and fish feed businesses of 10.6. ​ ​

And obviously, the implied multiple for those businesses is well north of 10.6 x EBITA based on the increased offer [by SHV] of €44.50,”​ said the spokesperson. 

Indeed many analysts agree that the latest SHV bid translates into multiples not seen in previous transactions in the sector. 

However, APG, in a letter to Nutreco management, questioned the executives’ emphatic support for the SHV deal. The response from Nutreco can be read here.

And the Financial Times reports that other Nutreco shareholders, such as VEB and Hengistbury, say SHV’s latest offer undervalues Nutreco.

Cargill could make counter bid ​

Earlier this month, Gerard Rijk, analyst with SNS Securities, told us he reckons Cargill could go as high as €50 a share to secure the Dutch group. 

Insiders say the current share price for Nutreco, which this morning hit €46.15 a share, would indicate the market also believes that a counter bid from the US company is forthcoming.

SHV has yet to finalize its offer. The expectation is that will happen before the end of next month.