Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<a href="https://www.smartkarma.com/entities/25165" target="_blank" data-smartkarma-citation="entities:25165:1">Saputo Inc (SAP CN)</a> and <a href="https://www.smartkarma.com/entities/21895" target="_blank" data-smartkarma-citation="entities:21895:1">Dairy Crest (DCG LN)</a> today announced an all-cash deal where Saputo will buy Dairy Crest for 620p/share, to be implemented through a Scheme of Arrangement which the two parties say is likely to close in Q2 2019.
Saputo is a Canada-listed dairy company which has grown through serial acquisition - more than 30 acquisitions in the last twenty years - but curiously none of the acquisitions have left it with any operations in the UK. Dairy Crest is a leading UK-based dairy and cooking staples company whose best-known products are Cathedral City Cheddar Cheese, Clover margarine, Country Life butter, and Frylight cooking oil as well as other minor butter-similars and butter-replacement spreads.
This would be Saputo's largest purchase in ten years - by a factor of three over their second largest - the purchase of Warrnambool Cheese &amp; Butter Factory in Q1 2014.
Shares are trading through terms early, perhaps on expectations the wide open register means shareholders can try to hold out for a higher price. 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/079/855/original/more.gif?1550843799" class="editor-image img-responsive" data-smartkarma-image-id="79855"></figure>
At a decent premium (13.9x TTM EV/EBITDA at 620p) to where the rest of the smaller-cap dairy products sector trades (below 10x on a median basis), and the highest EV/Revenue or EV/EBITDA multiple that I can find Saputo having paid, asking for more may not get you more, but investors clearly think it worth a try. 
An extra 10% would clear out most of the naysayers who bought in the frothier "we're going to be an asset-light branded goods company" days of 2015-2017. It would put March 2019 PER at just under 20x and just under 13.9x March 2019 expected EV/EBITDA.

Saputo Inc (SAP CN) and Dairy Crest (DCG LN) today announced an all-cash deal where Saputo will buy Dairy Crest for 620p/share, to be implemented through a Scheme of Arrangement which the two parties say is likely to close in Q2 2019.
Saputo is a Canada-listed dairy company which has grown through serial acquisition - more than 30 acquisitions in the last twenty years - but curiously none of the acquisitions have left it with any operations in the UK. Dairy Crest is a leading UK-based dairy and cooking staples company whose best-known products are Cathedral City Cheddar Cheese, Clover margarine, Country Life butter, and Frylight cooking oil as well as other minor butter-similars and butter-replacement spreads.
This would be Saputo's largest purchase in ten years - by a factor of three over their second largest - the purchase of Warrnambool Cheese &amp; Butter Factory in Q1 2014.
Shares are trading through terms early, perhaps on expectations the wide open register means shareholders can try to hold out for a higher price. 

At a decent premium (13.9x TTM EV/EBITDA at 620p) to where the rest of the smaller-cap dairy products sector trades (below 10x on a median basis), and the highest EV/Revenue or EV/EBITDA multiple that I can find Saputo having paid, asking for more may not get you more, but investors clearly think it worth a try. 
An extra 10% would clear out most of the naysayers who bought in the frothier "we're going to be an asset-light branded goods company" days of 2015-2017. It would put March 2019 PER at just under 20x and just under 13.9x March 2019 expected EV/EBITDA.

Saputo to Buy Dairy Crest; Initial Market Response Wants a Bump

United Kingdom

Dairy Crest Group plc manufactures and distributes dairy products.  The Group provides spreads, cheeses, liquid products, and other fresh dairy products to the retail grocery sector.  Dairy Crest's food services division sells dairy products to catering outlets, small businesses, households, and food manufacturers.  Brands include Clover, Cathedral City, and Frijj.

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Saputo to Buy Dairy Crest; Initial Market Response Wants a Bump

Saputo Inc (SAP CN) and Dairy Crest (DCG LN) today announced an all-cash deal where Saputo will buy Dairy Crest for 620p/share, to be implemented...

Travis Lundy