The Bellamy’s Australia Ltd (ASX:BAL) share price is going bonkers, trading a huge 55% higher today following a takeover offer announced this morning.
That means over the past month the Bellamy’s share price has jumped from around $8.50 to its current price of nearly $13!
About Bellamy’s Australia Ltd
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 mothers. It is now becoming a growing presence in the large Chinese market.
The Offer
As reported by Rask Media’s Max Wagner today, the proposed takeover offer values Bellamy’s at a combined $13.25 (dividends plus cash takeover) per share and has come from China Mengniu Dairy Company Limited (SEHK: 2319), one of China’s leading dairy product manufacturers.
The Chinese company is going to buy Bellamy’s at an enterprise valuation of 30 times the reported normalised FY19 EBITDA, putting Bellamy’s at a total valuation of $1.5 billion.
Why would a Chinese company want to take over Bellamy’s?
Mengniu’s CEO Jeffrey Minfang Lu, said: “Bellamy’s is a leading Australian brand with a proud Tasmanian heritage and track record of supplying high quality organic products to Australian mums and dads. This leading organic brand position and Bellamy’s local operation and supply-chain are critical to Mengniu.
“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.”
Buy, Hold or Sell?
With the share price at $12.88, there’s still a 2.8% discount to the offer price, with a bit of that discount due to the timing until the prospective timetable date until 24 December 2019.
Unless another offer comes in, it seems as though this offer will go through.
What Happens Next?
Bellamy’s will be sending the scheme booklet to Bellamy’s shareholders in early November and the vote of whether to go ahead or not will be held in December.
It will be a shame to lose one of Australia’s better consumer businesses off the ASX boards, but every business has its price.
If I were a Bellamy’s holder I’d probably sell today and look to re-invest the cash into other growth shares such as the ones in the free report below.
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