UPDATE 1-Wessanen shares at 11-month highs on M&A talk
Thu Dec 17, 2009 10:49am EST
* Speculation on takeover offer, divestments
Stocks | Mergers & Acquisitions
* Deal on divestments due before end of year
* CFO says divestment talks 'well on the way'
* Shares up 6.2 pct (Adds CFO comments)
By Aaron Gray-Block
AMSTERDAM, Dec 17 (Reuters) - Shares in Dutch food group Wessanen NV (BSWSc.AS), which is undergoing a significant repositioning, rose to an 11-month high on Thursday on talk of a possible bid for all or part of the debt-ridden company.
Hit by lower sales and accounting irregularities this year, Wessanen said in April it was considering selling its North American units -- including the Tree of Life (TOL) distribution unit -- to focus on Europe and shore up its finances. [ID:nLM143258]
Shares in the company jumped almost 13 percent last Friday and were up 6.2 percent at 4.93 euros at 1503 GMT after rising more than 7 percent earlier to touch an 11-month high of 4.98 euros.
Wessanen had reiterated in November a planned sale of Tree of Life -- which it bought in 1985 and represented about 50 percent of its 2008 sales -- by the end of the year was on track and that it was in talks with several parties.
"The sale process is continuing and is well on the way," Chief Financial Officer Frans Eelkman Rooda told Reuters in a telephone interview, declining to comment further.
Eelkman Rooda also said he had observed the volatility in Wessanen's shares, but declined to comment on market rumours of a possible bid for the entire firm.
"The share price volatility for Wessanen can mean basically two things: one, there is speculation they are going to sell Tree of Life or two, there is speculation on the total sale of the company," SNS Securities analyst Richard Withagen said.
VALUATION
Analysts on average estimate TOL could yield about 150 million euros ($216 million), with estimates ranging from 113 million to 200 million euros, based on a multiple of seven times earnings before interest and taxes (EBIT) or 25 percent of sales.
"If they get to 150 million euros I will be very happy with that," Kepler Capital Markets analyst Ton van Ooijen said, adding the market knows Wessanen wants to sell TOL, which could pressure the price.
Struggling with a heavy debt burden, Wessanen cancelled its end-year 2008 dividend in February for "financial flexibility" and has seen its profits slump due to the recession, warning in October it would report a fourth-quarter operating loss. [ID:nLS625907]
Speculation has risen, however, that a bid might be coming for Wessanen as a whole, but Withagen downplayed such talk.
"I do not think they will attract a takeover offer as long as they own TOL. After this disposal, I think the chance a private equity company acquiring them increases," he said.
CFO Eelkman Rooda said the company will use the proceeds from the TOL divestment to pay down debt and did not rule out add-on acquisitions for its Wessanen Europe operations.
"We will be updating the market on our European strategy at the appropriate point in time," he said. (Editing by Sharon Lindores and Rupert Winchester) ($1=.6942 Euro)