Arla Foods Uk Share Discussion Threads

[ptgint] 03/11/2006 12:16

Interesting to see these recent discussion points. I initially agreed with tiredoldbroker's analysis of the situation and agreed the institutions would tend to ignore the past costs and concentrate on the future expected profit and growth (or lack of !), but what has thrown a spanner into this thinking is why they would be in the market buying at current prices (if this is correct).The only logical answer is to strenthen their negotiating position and hence a price of 75/80 would seem a reasonable objective for them. However this assumes it is the same institutions who already are shareholders buying more stock.

[gerry321] 01/11/2006 22:04

tiredoldbroker
Your analysis is spot on from an acctng standpoint..I cant argue with it
However it will not be accountants who do this deal ...more likely to be guys with a general mgt background who can judge the Amba bottom line better from a strategic standpoint

this is not about how much the funds need to sell at
..........as about how much amba are prepared to buy at.......
No doubt like me you want the highest share price possible ............


We shall see

[tiredoldbroker] 01/11/2006 17:36

You know, I quite like ARU as a trading stock and have done some nice trades over the years, but I have to tell you that I'm not convinced it is a real growth story - I can see that Arla in Scandinavia likes to have a major market for Lurpak safely in their control, and will happily marry the distribution of other products to that. But institutions won't consider what they've paid for ARU shares in the past, or Express Dairies shares in the distant past, and expect that price back with interest.

If that was their policy, they'd just put money on deposit. Shares don't work like a savings account, so I don't go along with Gerry321's idea that "Surely the take out share price must reflect what the major funds paid for their holding and the profit + interest they believe they are due". They'll look at the share price over the last year or two at most, and the profit record (which is patchy), and the forecasts of future profits from brokers and their in-house analysts. Then they'll decide what sort of exit p/e on coming earnings makes sense to them, and I reckon they'll feel that a prospective p/e of 14 is pretty much top whack for a company with a record like ARU's. You can buy a stock will genuine growth prospects cheaper than that.

Another £30m on the exit price is equivalent to them giving away another full year's profits after tax, and I think they'll feel that is too much cream on top of a pint of at best semi-skimmed.

[deniscaff] 01/11/2006 16:36

p.s

The ceo is no Stuart Rose, my guess is mid 70s hope i'm wrong and it's nearer 80 either way it will go.

Cheers

[deniscaff] 01/11/2006 13:21

Good post's but getting a bit technical for a simple old milkman like me,for what it's worth I think the institutions will analyise the fundamentals hear the views of were the current ceo as to were he thinks he can take the share price through normal trading and then they will decide what price they will sell exit at, the milk partnership will have a different agenda as they need an outlet for their members product more than they need the money, individual members may vote for a short term windfall but once they are broken up there are no guarantees they will be offered a contract by any other dairy or co-op , I beleive they will try to negotiate entry into the Arla Amba co-op for giving up their shares and current contracts,which puts Arla Amba in a very strong barganing position to pick up their 5%.

[gerry321] 31/10/2006 22:38

Que
Good analysis.......which I think is spot on
Conclusion........
All us lttle people should be piling in as long as we can by up to say 68p for what will be at least a guaranteed 10% gain

[quepassa] 31/10/2006 18:22

Two very interesting posts.

Arla Foods have 611 million shares in issue. Amba own 51% already.

A price of 70p per share would cost Amba £209.5m for the remaining 49%. A price of 80p per share would cost £239.5m. -A mere £30m extra which in my opinion is small change for Amba and this amount is very unlikely to be a deal-breaker for them.

An incremental £30m would not make them shy away from their corporate strategy of growing their position and importance in the UK market and beyond.

Amvescap/Invesco have recently increased their shareholding from 15.9% to 16.66%.Interesting that they are still buying at 66/67p.They are strengthening their hand further. Milk Partnership still own 5.29%.

This 22% is "tightly held" and I very much doubt that either Amvescap or Milk Partnership will let the shares go for the 70p level which was already breached some months back. Without this 22%, Amba have little or no chance of achieving the 100% they need and want.

Personally, this leads me to believe and agree that we will see a price much nearer to the 80p level.

[gerry321] 31/10/2006 16:25

tiredoldbroker
Surely the take out share price must reflect what the major funds paid for their holding and the profit + interest they believe they are due......
..The funds are in pole position since the business is bound to grow eventually to the valuation share price they want ..its only a matter of time and whether they need their money back sooner rather than later

So Amba either buy the balance of stock now at a premium to its net worth
Or

Sell their 51% share...........unlikely

Run down the business...ie go in the huff with the funds.....also unlikely

Continue to grow the business to the point where a fair value price with no premium is acceptable to the funds
Since the share price has already touched 70p in the past I reckon 75p is the absolute minimum and 80p more than a 50% bet....
We shall see

[tiredoldbroker] 31/10/2006 11:18

I would suggest that first of all, we know for a fact that the Scandinavian parent has not been buying stock in the market, because in a bid situation, they'd have to issue an RNS for every day's purchases.

Secondly, the trend in forecast earnings for the year to Sept 07 is fairly flat, probably lower now than 6 months ago, at a shade over 5p per share.

Thirdly cash flow per share is shown on advfn at a little under 14p.

The conclusion I'd draw, which the current market price seems to support, is that the takeout price will be a shade over 70p - a p/e of 14 for a company with rather erratic earnings, or over 5 times cash flow, which seems a fairly full price to me. As I was buying not so long ago in the 40s, I'd love to see a price of over 80p, but I just don't feel the numbers support it.

[gerry321] 26/10/2006 20:32

Inki
I reckon its just the in out brigade taking their very short term profits
( ie those who got in after the announcement and dont know a lot about the business
.......you can be sure that if there was serious news affot the drop would be much greater than a few pence

[inki] 26/10/2006 12:46

Is the pull back, a shake out by chartist followers, approaching a resistance level? Alternatively is it a sign, 'interested parties' know the buy out price will be closer to 70p than 80p.

[gerry321] 24/10/2006 23:01

Whats the pre war donkey singing.....??
........Give you a clue
For those who follow US politics!

[quepassa] 24/10/2006 19:40

I tend to agree that the price should be/will be c. 80p plus.

I trust and have to believe that the major institutional shareholders will drive a very hard bargain. Arla Foods UK is absolutely key and central to Arla amba's strategy. They want Arla Foods UK very badly and the institutional holders will know this.

Dated October 2006, Arla amba have published their Mission/Overview statement and presentation in full on their web-site. This makes fascinating reading.

Page 16 of their powerpoint type presentation talks of "growing the UK". The presentation bristles with references to Arla Foods UK and also to a strategy clearly involving M & A.

Go to www.arlafoods.com and click on the latest news dd. 20/10/06 about the take-over talks. When you arrive at that page, click on the highlighted presentation right at the bottom of the page.

After reading this, I am tempted to believe that Arla amba will "pay up" to ensure a smooth and swift transaction and conclude a take-over as early as possible now. They know the business back-to-front, they have sat on the Board for several years as the 51% existing owner and must be totally conversant with all of Arla Uk's assets, liabilities and its regulatory environment and all the sometimes difficult relations with farmers and the supermarkets.

So, we are just talking about a price. Also assume that Arla amba have been in the market now mopping up all they can. The remaining shares will rightly rise in value and price.

I personally believe that Arla amba will be prepared to pay a very reasonable price for the remaining stock which imho will be in excess of 80p.

[gerry321] 24/10/2006 17:50

Den
A lot may depend on what average share price the funds bought into ARU at........
At a minimum they will be pressing the Board to get them what they paid in 2004 plus 5% pa lost interest cost + a bid premium of at least 20 to 30%
Dont know if the £ / euro rate has changed much since the funds bought in ie whether 49% of aru is more euros now than 12m ago
Amba have no real leverage other than to walk away and maybe come back another day which surely would be when the business was more profitable and worth more
The funds can hold out indefinitely but since they probably bought on the premise of a bid they have to look seriously at every offer
also
With todays share price at 68p surely the deal will be much nearer 80p than 70p ??
Those newcomers who have bid up the share price will no doubt have done their summs and also assessed what is needed to take out the funds

[hvs] 24/10/2006 17:49

I will take 75p for all my holding good rise from 47p.

[deniscaff] 24/10/2006 17:00

I've now heard from a source equally as good as my last one that it will be "done and dusted" in a couple of weeks @ 70/75, I was hoping for 80/85 if it went on until the end of the year. Has anybody got a view on how long it may take and on what the final price will be? bearing in mind the price was 58p at the announcement a 30% premium would give us 75p which may be considered fair, but since the sell off of the declining doorstep sector and the likly windfall of selling the Ruislip site and £x millions from their suit against RWD announced today would they not be able to take the share price to 75p with normal trading ?

[deniscaff] 24/10/2006 10:35

Thanks chaps.

I hear that even though it's a "done deal" talks will go on until the end of the year.

Cheers

[quepassa] 24/10/2006 09:45

Thanks. Yes, I agree Den has been an excellent contributor. I'll look in to the other stocks which you were kind enough to mention. Aprreciated.

[gerry321] 23/10/2006 23:31

Que
I1m sure it was that perceptive poster Den who first identified the disposal of doorstep deliveries........with whom I often found myself in agreement
For what its worth.......
I am also into HRN ( what a happy train ride for the last 15m ! but another 1o% possible by end Jan 07 trading update)....
......... and two bottom fishers ITM and BLVN whenre I am down but topping up
......and which I am hoping to see up at least 20% in the next 6m or so.....on the back of my aru profits of course !!
DYOR
Thanks again

[quepassa] 23/10/2006 14:24

Gerry,

You are very welcome. - Fingers crossed that it goes ahead.

Equally very grateful to you for your many extremely perceptive insights into ARU. You called it exactly spot-on about the necessity to dispose of the doorstep business prior to Arla amba seeking to increase its stake.

Coincidentally, I read the profile you posted about yourself which was interesting including several stocks which you may have been watching in the past. I think we share a common interest in the parental/subsidiary relationship. We have also exchanged info on AVE as you may recall.

May I perhaps ask which other Boards you post on?

Regards.

[gerry321] 23/10/2006 11:22

Que
I think it was one of your posts around 12m - 14m ago that got me first interested in ARU and eventually lead to my investment
Thanks.........

[quepassa] 20/10/2006 14:33

yes, very much so.

The news releases from Arla Uk have nearly always to the best of my recollection been rather sterile. I believe the words to the effect that talks may or may not lead to something is the standard legalese/disclaimer language that nearly always accompanies these announcements.

All I can say is that several posters to this BB have been forecasting this for a while.

Arla amba were restricted from increasing their shareholding beyond 51% in Arla UK until last October 2005.

It is one of those situations where all the pieces of the jig-saw puzzle seem to fit perfectly and the stated strategy of Arla amba is to further penetrate the core European markets. - Personally highly confident that Arla amba are very keen indeed to increase their current 51% to the full 100%.

If you go to Arla amba's web-site which is www.arlfoods.com

you will see what the CEO Peder Tuborgh said to-day 20th October 2006 about the situation which is:-

"We are unable to give more background or further information at this time because of restrictions imposed on us by the City Code on Takeovers and Mergers. All I can say is that our approach is a natural development from the merger in 2003 between Arla Foods plc and Express Dairies. We are now in talks with our British subsidiary about a possible bid for the remainder of the shares. We will make further announcements in due course", comments Arla Foods amba's CEO Peder Tuborgh.

I hope this helps.

QP

[topsy turvy] 20/10/2006 14:14

Yes QuePassa, I certainly wouldn't want to take anything away from your excellent analysis.
If we achieve 80p all told I shall be well pleased. Do you think the cautious nature of today's RNS is simply par for the course?

[deniscaff] 20/10/2006 14:10

Ops ! I must be getting excited .

[deniscaff] 20/10/2006 14:09

Thanks for the reminder Que , Not quite a full pint yet but certainly getting there !