Nutreco still eyed by Cargill, but investors wary of board’s lust for SHV
Shareholders waiting for more details on Cargill potential bump
Royal DSM, Archer Daniels Midland seen among alternative partners to Permira
Cargill could still be interested in pursuing Nutreco [AMS:NUO] after its initial approach was rebuffed by the Dutch company’s board, this news service understands. Nutreco shareholder resistance to SHV’s offer has been noted by Cargill and bid partner Permira, it was said.
But some top shareholders said they are wary of how management will react if Cargill were to re-approach the company.
Nutreco management is backing Dutch SHV’s offer to keep Nutreco intact. This will allow management to retain their jobs, it has been noted in the press and by analysts.
The situation is also starting to attract political scrutiny in the Netherlands. Local media reported former Dutch Agriculture Minister Cees Veerman calling for Nutreco to remain in local ownership.
Top shareholders were cautioned by management on the prospect of better offers on the day SHV announced its initial EUR 40/share offer, one top-ten investor said. This indicates management are incentivised to ward off Cargill, he said.
Dutch fiduciary duty requires a focus on stakeholders and not just shareholders, a Nutreco spokesperson noted. This means the effects on customers and suppliers, as well as on the company’s employees, are taken into consideration alongside price, he said.
Shareholders are now waiting for more details from Cargill on its potential bid. Nutreco said Cargill’s expression of interest indicated it would buy the company’s Fish Feed division while Permira would take Animal Nutrition. The approach indicated a EUR 43.20/share offer, Nutreco said. SHV subsequently raised its offer to EUR 44.50.
One top-20 investor speculated Nutreco could fetch a price of about EUR 50/share, but added this all depends on the synergies Cargill can extract from Fish Feed. Nutreco’s two divisions also have synergies between them which might have to be discounted from a break-up valuation, a second top-10 shareholder said.
Any bid also requires a commitment from Cargill’s board to make a move into salmon feed, a sector banker said. The company was not in a position to look at buying Cermaq’s [OSE CEQ] salmon feed arm EWOS last year when it was put up for sale, indicating Cargill would have to have reviewed strategy since then, he said. Cargill’s existing operations in fish feed focus on shrimp.
The Nutreco spokesperson declined to comment on how the company’s board might react if Cargill made another approach. Nutreco’s merger agreement with SHV stipulates an indicative rival offer can only be considered if it is at least 8% higher than SHV’s bid, or EUR 48.06/share.
Analysts have also questioned Permira’s desire to pay more for its part of any deal. Trade player Cargill would have a much longer term ownership view than the private equity fund, analysts wrote. In a scenario where the deal becomes too expensive for Permira, sector bankers suggested Cargill could turn to other trade players to take on Nutreco’s Animal Nutrition business.
Royal DSM [AMS:DSM] and Archer Daniels Midland [NYSE:ADM] could be potential candidates to team up with, one banker suggested. Koch Industries could be an outside chance, a second banker said. Integrated feed producing companies Charoen Pokphand group (Thailand), Brazil Foods, Land O’Lakes Purina (US), New Hope group (China) and Tyson Foods [NYSE:TSN] (US), might also be candidates, ABN AMRO analysts wrote.
A Cargill spokesperson declined to comment further to a 10 November statement confirming it issued a letter to Nutreco’s Executive and Supervisory boards expressing its “interest in pursuing a structured transaction together with the Permira Funds for a cash offer for Nutreco.” A Permira spokesperson declined to comment, saying Cargill is the lead partner in the situation.