SHV to finalize offer for Nutreco shares by early December

26-Nov-2014 - Last updated on 28-Nov-2014 at 08:23 GMT

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Nutreco says the offer process from SHV is “on track” with the investment firm saying it will publish its offer memorandum on its intended acquisition of all the animal nutrition company’s shares at the start of next month.

Nutreco is set to reveal more detailed information on the process and its decision-making leading to the offer at the same time as the SHV bid is finalized.

On 10 November, Nutreco and SHV jointly announced that SHV had agreed to increase its initial offer price for the feed group from €40 to €44.50 per share.

The higher bid from SHV was in response to an ‘expression of interest’ that Nutreco had received from Cargill on 8 November 2014.

Cargill, in a joint effort with private equity firm Permira, tried to trump the original SHV bid for Nutreco with an 'offer' of €43.20 a share.

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.

However, Nutreco management rejected the approach from Cargill, saying it was inconsistent with the group’s long term strategy in that it would break up the company.

Today, the Dutch group said it understands from Cargill that it is currently “evaluating the situation."

Shareholder reaction

Shareholders in Nutreco such as Dutch pension group, APG, have been calling on the feed firm to open its books to Cargill and Permira.

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, and that asking for insight into the books of a competitor, without a serious proposal being made, is really not done.

Valuation of Nutreco

Last week, a spokesperson for Nutreco 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.