Bellamy’s Australia Ltd (ASX: BAL) has entered into a Scheme Implementation Deed proposing that a Chinese company acquires Bellamy’s for around $1.5 billion.
Bellamy’s is an ASX-listed organic infant formula and organic food company that was founded in 2004 in Launceston, Tasmania. It was the first company to offer an organic infant milk formula range to Australian parents. It is now becoming a growing presence in the large Chinese market.
The Offer
The proposed takeover offer has come from China Mengniu Dairy Company Limited (SEHK: 2319), one of China’s leading dairy product manufacturers with a market capitalisation of around $24.6 billion.
Mengniu has proposed to acquire Bellamy’s for a total cash amount of $13.25 per share, comprising $12.65 from Mengniu and a $0.60 fully-franked special dividend paid by Bellamy’s.
The valuation of approximately $1.5 billion represents an enterprise value of 30 times reported normalised FY19 EBITDA. The price of $13.25 per share amounts to a 59% premium to the closing price on 13th September 2019.
Bellamy’s Board of Directors unanimously recommended that shareholders vote in favour of the Scheme.
Management Commentary
Bellamy’s Chair John Ho said the offer is a reflection of brand strength.
“The proposed Scheme is an attractive all-cash transaction at a 59% premium to the prevailing share price,” he said.
“It reflects the strength of Bellamy’s brand, the dedication of 160 passionate employees and the progress of our turnaround plan.”
Mengniu’s CEO Jeffrey Minfang Lu said: “Our sales growth ambitions for Bellamy’s in Australia, and the broader Asia Pacific region, will see investment in the local dairy industry to ensure the required capacity is in place to achieve these plans.”
What’s Next?
The takeover is subject to a number of conditions including court and shareholder approval, and no material and adverse occurrences. The indicative timetable has the first court hearing scheduled for 29th October and the second for 6th December, and if all approvals are granted then the implantation date is estimated to be 24th December 2019.
The special dividend of $0.60 would only be paid once the Scheme becomes effective.
Companies To Watch
Bellamy’s will obviously be one to watch today, but so will The a2 Milk Company Ltd (ASX: A2M) and Bubs Australia Ltd (ASX: BUB), which may be about to face a much stronger competitor in the Chinese market.
For more high-growth shares, have a look at the free report below.
Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
