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Bellamy’s receives $1.5 billion takeover offer from China Mengniu Dairy Company

The Bellamy’s Australia Ltd (ASX: BAL) share price looks set to rocket higher this morning after the infant formula company revealed that it has received a takeover approach.

What did Bellamy’s announce?

According to the announcement, Bellamy’s has entered into a scheme implementation deed under which it is proposed that China Mengniu Dairy Company will acquire 100% of the issued share capital of Bellamy’s via a scheme of arrangement.

If the scheme proceeds, Bellamy’s shareholders will receive a total of $13.25 cash per share, comprising $12.65 cash per share and a $0.60 per share fully franked special dividend paid by Bellamy’s prior to the implementation of the scheme.

This values Bellamy’s equity at approximately $1.5 billion and represents an enterprise value of 30 times reported normalised FY 2019 EBITDA.

It is also a 59% premium to the last close price of $8.32 and a 54% premium to the three-month volume weighted average price to September 13 of $8.59. Though, it is worth noting that it is ~40% lower than its 2018-high, so not all shareholders will be celebrating the news.

The Bellamy’s board of directors has unanimously recommended that shareholders vote in favour of the scheme, in the absence of a superior proposal and subject to an independent expert concluding that it is in the best interests of shareholders.

Each director intends to vote all the Bellamy’s shares they hold in favour of the scheme, subject to those same qualifications.

Bellamy’s Chair, John Ho, said: “The proposed Scheme is an attractive all-cash transaction at a 59% premium to the prevailing share price. It reflects the strength of the Bellamy’s brand, the dedication of 160 passionate employees and the progress of our turnaround plan.”

This sentiment was echoed by Bellamy’s chief executive officer, Andrew Cohen.

He said: “Mengniu is a preeminent dairy company in China and an ideal partner for our business. It offers a strong platform for distribution and success in China, and a foundation for growth in the organic dairy and food industry in Australia.This transaction can further deliver on our founder’s original vision of a truly iconic Australian brand and ‘A Pure Start to Life’ for the world. Our employees, our trade partners and local organic manufacturers will continue to grow and thrive with the success of our business.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Bellamy's Australia. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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