“I would expect that behind the scenes Cargill is trying to approach both Nutreco management and the Boards to open up a conversation on how it could get a look at the feed group’s books so it can carry out due diligence,” Maarten Bakker, equity analyst at ABN AMRO, told us.
But he said there is no legal obligation on Nutreco to give such privileged access to its competitor, despite increasing pressure from some of its largest investors for it to do so. “There is the feeling from some shareholders that Nutreco management fell into the arms of SHV and they want Cargill to be given an opportunity to make a play for the company,” said Bakker.
Last week saw Cargill reveal that it was hoping to acquire the Dutch feed group in its entirety. "After extensive study, we decided to continue on a standalone basis, and consider an offer for the whole of Nutreco. We believe we would be very good stewards of the Nutreco business in the interest of all stakeholders,” said the agribusiness group.
Nutreco's shares jumped 5% on the news.
The communication revealed a change of heart from Cargill or perhaps a realisation that it would need to offer a deal that didn't attempt to break-up the Dutch feed group. In November, Cargill had indicated then that it was looking at acquiring Nutreco in a joint bid with investors, Permira. It would take on the fish feed side of the Dutch group’s activities and the remainder of the business would go to the private equity firm.
Issue about potential Nutreco disintegration removed
Nutreco management’s approach up until this week had been to dismiss the ‘expression of interest’ from the US trader on the basis that it would bring less deal certainty than that promised by investment firm, SHV, whose bid values Nutreco at nearly €3 billion ($3.7bn).
“Cargill, by saying it wants to make a standalone offer and no longer wants to break-up the company, has effectively taken away most of the arguments that management at the Dutch firm had against it.
I think it makes sense for Cargill to take on both the premix and fish feed businesses of Nutreco but there could be challenges in relation to competition violations on the premix side. It may have to sell off some assets in certain European markets to appease competition authorities,” said Bakker.
He said that Nutreco management may continue to emphasise the risks associated with a Cargill takeover, playing the monopoly threat card, while continuing to plump for the SHV offer and stressing how it safeguards the interests of all stakeholders including employees.
Today, Mark Woldberg, a spokesperson for the Dutch feed firm, told FeedNavigator: “We have not received a concrete proposal that is likely to qualify or evolve to a competing offer. There is no doubt that Cargill knows what to do to allow Nutreco to potentially engage with them.”
The tender period for SHV's offer began on Monday 8 December and will end on 17 February 2015. Nutreco confirmed it will hold an extraordinary shareholder meeting on February 9 to discuss that bid.
Nutreco has been attracting takeover interest after the failed disposal in June of its Iberian compound feed and meat business.
Bolt-on buys in Brazil
Meanwhile, earlier this month, it announced that it had made two ‘bolt on’ acquisitions to expand its presence in Brazil.
The purchases were in line with the Dutch group’s strategy to expand into growth geographies and include Fatec, a producer of premixes and animal health products for broilers, layers, swine and dairy cows, and BRNova, a producer of premixes and feed specialties, mainly for poultry and swine.