The A2 Milk Company Ltd (ASX: A2M) share price has gone bonkers today, up 12.08% to $6.68 after media reports of takeover interest.
A2M share price
Despite empirical research suggesting A2 milk is easier to digest than conventional cows milk, the recent share price fall has been difficult to swallow for long-term shareholders.
The share price currently hovers around levels not seen since 2017.
From its peak share price of $20 last year, shares are down over 65% after the closing of international borders significantly impacted A2 Milk’s distribution channels.
What was reported?
The Australian newspaper reported this morning that the world’s largest food company, Swiss-based Nestle SA (SWX: NESN) is interested in potentially acquiring the company.
Nestle has been keeping a close eye on A2 Milk however has not yet made an approach with annual results set to be released on Thursday, August 26.
The company has reportedly looked at A2 Milk in the past, however, believed the valuation was too rich.
Is A2 Milk and Nestle a match made in heaven?
It’s not surprising to see Nestle emerge as a potential suitor given new CEO Mark Schneider’s strategic plan.
Since joining the company in 2017, Schenider has led a major acquisition agenda to position Nestle towards a healthier food portfolio.
Nestle already competes with A2 Milk in the lucrative Chinese infant milk market under its Aptamil and Illuma brands.
The company would be able to leverage its existing distribution network across China and other new regions to build A2 Milk’s reach.
Currently, A2 Milk only has material operations in Australia, New Zealand and China.
For those interested, Schneider explains the strategy in more detail with Magellan Financial Group Ltd (ASX: MFG) chief investment officer, Hamish Douglass.
What does this mean for shareholders?
Nothing at this stage.
It’s purely speculation and nothing has been confirmed by A2 Milk or Nestle.
My take
It doesn’t surprise me to see A2 Milk attracting attention.
It has built a strong brand underlined by the associated health benefits of the A2 milk protein. This fits well with Nestle’s desire for a more health-oriented product range.
Today’s report certainly put a rocket under the share price. I’m expecting more details to emerge in the future week and months.
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