Takeovers and struggles in the sector Week ending 20th Sept 2019

Welcome to my Friday dribble where we talk things agri sport and life.

A big shot in the arm for the agri corporate sector with Chinese group Menghui launching a takeover bid for Bellamy’s organic valuing the company at $1.5BN. It’s a BIG number for a company that is essentially a reseller of products made by other processers. A glance at the latest BAL balance sheet shows hard assets of just $5.8M. That’s a lot of good will in the acquisition price…!!! (On the current profit run rate it will take 71 years to break even on the purchase price……)

The big positive from the announcement is that it shows how important our products are to the Chinese people. They really want clean green aussie made food and formula.

Still on dairy related stuff and Nestle plan to close their Tongala condensed milk plant in Northern Victoria. By all accounts it isn’t big and doesn’t take in much milk. Also falling on hard times is small dairy processing company Brancourts which had administrators appointed this week.

But where there is trouble there is also opportunity. Lion Dairy and drinks are struggling, Fonterra are not happy investors in this country and Saputo may need to sell a Tassie asset if they succeed with the King Island brand purchase. If you are a strong dairy processor at present then there are potential assets to be picked up at good prices.

On other agri related news I caught up with ELD CEO Mark Allison this week at a conference. The drought has had an impact but the business is still doing well and the acquisitions over the past year or so have helped. Also the recently announced AIRR acq will kick in soon and provide synergies in 2020-21.

In aquaculture news we caught up with Angel Seafoods this week. AS1 is there ticker. They produce Pacific rock oysters in the Southern Ocean (Not the Pacific Ocean…) in the famous Coffin Bay region of SA. They are early to the listed space but are selling all they produce with more to come….watch this space.

Out today was the CLV result. Clover corp make the DHA that goes into infant formula and they had a cracking result…AGAIN..!! more next week.

On sport the rugby world cup starts soon and it looks like out team would be lost without the help of Fiji. But we will take them..!!