Arla Foods Uk Share Discussion Threads

[quepassa] 07/12/2006 10:39

2 x 500k purchases just went thru' at 64p. - Good to see that there is still buying esp bearing in mind that the share is now ex-dividend and no longer carries the 0.8p dividend entitlement ( subject to AGM/EGM !! ).

[damofarl] 07/12/2006 10:19

Gerry/Quepassa, posts crossed; Quepassa's 4- i agree as i believe there is such a 'takeover' clause in employee sharescheme.D.

[damofarl] 07/12/2006 10:14

Gerry,

Amba's website says cash offer; i checked amba's a/c's and the way articles of association for the coop are written, i don't see that they could issue amba paper.

"Arla Foods amba has entered into negotiations with its British subsidiary Arla Foods UK plc which may lead to a recommended CASH offer to purchase the remaining 49% of the shares...."D.

[quepassa] 07/12/2006 10:05

Hi Gerry,

You may wish to check these precise points with the Company Secretary or Assistant Secretary at Arla Foods UK. Slightly rusty on my Company Law and haven't read Arla's mem and arts.......

However, my best guess would be the following:-
1. Notice for EGM. Probably can be called at short notice.
2. I think a bid does not have to be in cash. However as Arla Foods amba is a co-operative owned by 10,000 odd milk-producers in Scandinavia, I think that a cash bid is their only route. The 51% purchase of Express was in cash.
3. Not sure on this point. I think a "scheme of arrangement" requires 75% to be held by amba, otherwise they require I believe 90% to go unconditional.
4.Haven't seen the the terms for the grant of options but it is highly likely that Directors can/would be entitled to exercise options ( if they are in-the-money ) on stipulated specific dates and additionally in the case of a take-over/merger.

Hope this helps (but do check these points elsewhere as I am not in a position to give you definite answers).

[gerry321] 06/12/2006 15:57

Doe anyone know ..........
How much notice needs to be given of an EGM ?
Does the bid have to be in cash ?
How many shares must be held by amba before the remaining shareholders are compelled to sell ?
Do unmatured options held by Directors lapse or can they be exercised ?

[quepassa] 05/12/2006 18:34

good to see a retail purchase for 216000 shares go through at 4.30pm to-day at 66p.

[gerry321] 05/12/2006 10:01

Presuambly when the shares go ex divi noboby will be buying much before the bid

[damofarl] 04/12/2006 22:26

Que/Gerry, as i said before, the posting highlighting the AGM/divy anomaly was telling, and there is definately something brewing; amba maybe a bit novice with the likes of UK regulatory req.'s, but they seemm too professional to me not to (at least) have an advisor point it out to them. Can't guess what the delay is but maybe they've been a bit tied up buying their 30% (with rights to other 70%) stake in Ingmans of Finland-certainly like to have their fingers in pies...

Arla amba's financial year runs to 30 Sep and for last published year, 04/05, Arla amba's accompanying statement was 5th Dec so maybe thats an omen for today! Hope so.D.

[gerry321] 04/12/2006 12:48

Que
thanks for your info
Agree that deal is probably in the bag.........
I`m a bit curious as to why there still appears to be ample stock remaining with the MMs........mms 50000 last Fri and today..........given a take out share price of even 70p this is still a very good buy at 63.75p ....Any thoughts ??

[quepassa] 04/12/2006 07:54

Exactly. This is what I was banging on about a couple of weeks ago. This is a very hybrid situation.

Ex-divi date is 6th.December. Record Date 8th December. -Payment date is normally Record Date + 20 days. Although it appears that Arla will use its discretion this time about the payment date.

The divi must be approved at the AGM. There is not yet any set date for the AGM - which is very curious indeed. Arla amba have additionally notified The Board that if a recommended offer is not forthcoming by the date of the AGM, then Arla amba reserve their right about which way they will vote on actual payment of the divi. - So theoretically and potentially, the announced dividend could be withdrawn. What this would do to a share price which had already gone ex-divi, one can only guess.

A real curate's egg, where the share could have gone ex-divi and then Arla amba veto the payment of it. - I have never seen anything like before.

Actually, it is so hybrid and so unusual in my experience that it leads me to conclude that a recommended offer was - and still is- expected by all parties in which case a normal AGM would not be necessary according to a senior representative of Arla Uk whom I contacted twice on the telephone specifically about this latter point.

This is one of the many reasons why I personally feel that the deal is in the bag and we are just finalising price.

Any views?

[gerry321] 03/12/2006 20:46

Que
didnt you post that the divi couldnt be paid without ratification at an agm.........??
The record date is 6 dec ..........Could this mean the divi will be delayed ?

[damofarl] 01/12/2006 12:19

Gerry, sorry no, but i'll see if i can find anything; as previously mentioned, i believe most of the benefit of imports is to amba, but can't recall where i saw it, must be a couple of reults back. i'll try and find some numbers on it, as a good question.

[gerry321] 01/12/2006 10:58

Damo
thanks for excellent info
do you know what share of aru sales and profit is taken by imports from amba versus milk brands......??

[damofarl] 30/11/2006 23:16

gerry, another thing...

Revenue Profit Mkt Cap


Dairy Crst 31-Mar-06 1,355.20 41.30 824m

Wisemans 01-Apr-06 568.56 26.73 352m

Arla 30-Sep-06 1,153.80 18.20 387m

i make that 3.04 margin for DCG; 4.75 for RWD and 1.57 for ARU.

if you just take bulk milk, RWD is the best comparitor, there margin is 3 times ARu's, with a similar mkt cap., on half the volume.

DCG is a better comparitor really in that it and ARU have (the supposedly) higher margin branded chesse operations as well; their revenue is 17% higher. their profit 127% higher and their mkt cap 117% higher.

i'm not here to say Wisemanns or Dairy crests valuations are to high,
I'm here to say going forward thats what were looking at, and DCG being the best comparitor look how much potential there is, and how much there is to gain, bearing in mind the better we do, the worse they do... D.

[damofarl] 30/11/2006 22:18

Gerry, thanks for your kind words; here's a few more thoughts;

i'm no accountant, but when i read the a/c's there appeared to be no ghosts or extraorinaries. If you look at pension provision, i feel they've been a little conservative (i.e its better than it looks), and their are tax benefits for amba

Theres only three main players, and whilst there was intense contract negotiations a while ago, they are all sitting on visible supply contracts to plan/budget going forward, so there is stability going forward (for all three). Arla Uk has stability of supply from AFMP so they don't have to worry about going to the farmers market price wise; they can (set) know what their costs are going ahead, and have anadvantage over RW and Dairy Crest in this regard. That said theres not much volume gain to be had by anyone, so putting the various companies efficiencies aside how can RW's share price double in 18 mths and ARU's drop by 40% (pre talks), with ARU being the biggest volume producer? O.k RW are probably more efficient than ARU, but i believe ARU has won contracts at minimal/loss margins deliberately to a) lower RW vol, volume being crucial and b) to validate the investment in new/updated state of the art dairies. c) earn credibility with customers going forward (the tesco's of the world are focused on price of course, but they also want deliverance of service and i think Arla is strong here). Long term this is a winner, as increases/decreases in volume have a disproportianate effect on profits in milk, with RW the loser and Arla the gainer. ARU have spent 29% ofthe market cap in the last 2 years on updating dairies.....the Locerbie investment was a masterstroke, and a sign of intent that RW WOULD have the fight taken to them; one has to understand the nature of national supermarket contracts aligned with nations (i.e. Welsh, Scottish
)desire to see 'local' produce). ARU could not previously promote 'Scottish' milk as such as it might have been proccessed in Leeds or Manchester, but know they can. The takeover of safeways by Morrison only helped volume wise as Safeway was strong in Scotland, whereas Morrisons were non-existent

The nature of the food industry is that audits are regular, if only for food health point of view, but quality customers such as M & S, Sainsbury, Waitrose will do their own; from this amba will now how they are performing, without appearing to be making a (takeover) inspection, or 'sniffing around' to much; everything they want to know is visible.

Why did Arla Uk not do a share buyback when in the mid 40's? o.k. amba would get 51% of the benifit, but it would have lifted the sp, and hence the takeover premium-because amba didn't want it!

Personally i think ARU shares are worth nearly a pound, yes seriously, they've took a hit on winning contracts, and a hit on updating dairies, but that cost has all come short term, for long term gain; i have to say that this strategic forward long term thiniking would not have come about without amba, but that in itself tells why i think 72 share price is the mark. I think for pi's ArlUk even with a continuing amba 51%, would be a better return than a takeover lonterm, as then ARU would reverse the benefit and effectively have gained 51% support for a leaner more efficient Co. Pi's have taken the hit and amba is going to get the cream....

Milk being the commodity market it is, commodity prices are paid; Arla's Cravendale is the only premium (pure) milk product, notwithstanding RW's 'Fresh'n'Lo' (which is really only of Scottish significance), and I think ARU is the only one innovating in this market.

Sorry for rambling, but i wrote as i though; personally, i'd rather ARU continued as is, as i believe the profits (ex heavy previous investment) will flow through sharply, but that amba will get the benefits and not us; i stick with 72 and at current prices i would continue to buy for a quick 10% (6 weeks), or if a heavy investment you could turn a buck on the margin as noo downside on 72; amba will buy Arla, that is not in question, its when, but they won't overpay, as i agree that the deal has already beeen done; the delay is just tieing up the loose ends (AFMP, semployes share allocations (immediate on takeover i understand). tax benefit/implications).

Sit tight, but i don't think 80 (even though i do think its worth way more than that)D.

[gerry321] 30/11/2006 21:13

Damo
Excellent and very shrewd post
I`m also coming round to the view that perhaps Amba never ever intended to exercise their bid option last Oct for the reasons you pinpointed...........ie lets let the share price take the hit for the costs needed to turn the business around post the express dairy merger...........which is exactly what has happened ........
(does anybody know what "extraordinary" charges are on the books since the merger ?..........I bet theres a slush fund in there also)

.........hence the timing of the amba bid is probably linked to some forecast of an upturn in profits resulting from the recent investment of around £112m
If we poor Pis can work this out then you can be sure that the funds will have done the same .............hence Que`s forecast of 80p may be closer than mine of early 70s........I hope

[quepassa] 29/11/2006 12:14

Another 100,000 purchased by Amvescap. They now have in excess of 17%. That is excellent news in my opinion for shareholders.

80p now in sight.


Gerry and D. Thanks for interesting replies and views.

[damofarl] 29/11/2006 07:51

Quepass/Gerry, as for monitoring the BB, undoubtedly! On the basis that they are i hope i'm wrong with 72 and its higher! I'm certainly not selling;as for free cheese, i just saw a pig fly overhead....

[damofarl] 29/11/2006 07:45

Gerry/quepassa, whist tiredoldbroker correctly states the obvious, i.e. illegal concert, any decent broker will know theres only one buyer with ambas 51%; far better for amba to buy 15 brokers for 15% than spend all year in the market, and thats just business, not 'orchestrated' (ehmm) albeit with the same effect

G, "...then Amba could strip profit from Arla post the takeover and leave the business desperate for higher milk prices thus forcing a leaner business model which competes better with RW..." -i don't know about 'post' takeover, but with the massive investment in sites post express merger, one could argue that amba has only incurred 51% of the cost of that investment, which depressed (short term) profits hence a reduced share price but by buying UK completely will reap 100% of the upside......

"Major investment programme completed

Capital expenditure for the year was £37.4 million, approximately half our
record spend of £74.7 million in the previous financial year. This substantial
reduction marked the conclusion of our major post-merger investment programme.
The principal components of our expenditure included £12 million on the
completion of our new Lockerbie dairy, and £6 million on the final phase of
modernisation at our Manchester plant. We also invested £3 million in
additional capacity at our Hatfield Peverel dairy, to facilitate the closure of
the Sheffield Park facility, and £3 million at Ashby to enable us to meet
increased demand from McDonald's under our sole supply agreement....."

I think amba have been very clever; just the money spent on those 3 sites £21 m could of fed through to the bottom line if the 'assests' had merely been churned

Quepassa, ..."I would love to know how the Arla Foods UK Board has created a water-tight ring-fence to ensure that the Directors with a foot in both camps are not involved in or influencing price negotiations which would be to the detriment of rank and file share-holders"....-you only have to look at the RNS 0f 26/27 June to realise how in bed they are, when UK issued by mistake ambas annoucement of a cheese acquisition which had nothing to do with UK; i don't think it is ring fenced, and do feel thats to the detriment of holders.

Directors shareholdings seem surprisingly small excepting Snmith's 988489; Gerry, the reason i asked where you got your holdings breakdown from was there seemed a few anomalyies; the share save vol (Share Secure Ltd) 99836 isn't the total holding, i believe its just that months, but there aren't previous disclosures because not neccessarry prior to 'merger' announcement; in the RNS it outlines the employee share bonus scheme but it doesn't clarify whether this purchase is inclusive of the employees 2 shares or merely the 3rd bonus share; if you take it as being all 3 for 1 month, then a years purchaese alone would be touching 1m. Additionally, 2.4 m shares holding in own shares are listed in recent results- have you labelled these as Express?. The reason i ask is at the very bottom of the results is the following:

"The Express Dairies Employee Share Ownership Trust ('the Trust') holds 3,827,431shares (2005: 2,166,855 shares) with a cost of £2.3m (2005: £1.5m) and a market
value at 30 September 2006 of £2.1m (2005: £1.3m). These shares were acquired
by the Trust in the open market. The Trust used funds provided by Arla Foods UK
plc to meet the Group's obligations under the long-term incentive plan."

Another 200000 are also listed in the results for employee share options.

All in, i think theres even less in free float than suggested.
Cheers.

[gerry321] 28/11/2006 21:45

Que
The ring fence is already there..........its called share options
All you need to know is how much each director has riding on the bid share price ...........for sure there will be mgt changes post the takeover and some of these guys may be negotiating part of their termination package
Also
A point back up your bullish bid sp
I know for a fact that multi nationals routinely fiddle transfer prices to optimise international profit...........not sure whether this is just as blatant when only 51% is owned..........lets assume it isnt
.........then Amba could strip profit from Arla post the takeover and leave the business desperate for higher milk prices thus forcing a leaner business model which competes better with RW
As for those monitoring the BBs............
I`m not selling for less than 100p ..........and free butter for life...........so there !

[quepassa] 28/11/2006 19:02

Hi Gerry, statement of the obvious but you can assume that the various advisors to Arla amba and Arla UK will be monitoring active BB's to pick up market sentiment.

- I would love to know how the Arla Foods UK Board has created a water-tight ring-fence to ensure that the Directors with a foot in both camps are not involved in or influencing price negotiations which would be to the detriment of rank and file share-holders.

[gerry321] 28/11/2006 18:29

damofarl
holdings data from latest rns for each holder.........
volume data from yahoo.finance

tiredoldbroker ..........I`d love to believe you for if there is indeed no private negotiation or advance buying by amba then the bid share price will become a public of offer to all simultaneously needing 90% to go unconditional and with no gurantee of acceptance before publication.........if so the only sure thing for amba is a knock out share price .........

[quepassa] 28/11/2006 18:14

Amvescap now just shy of 17% and still buying on market weakness.- Amvescap are excellent at maximising return to investors in t/o situations.

No, I am going to be more bullish on the take-out price of Arla Foods once again. I'm going to hang my hat on my original estimate which was c80p cash including dividend and perhaps a special dividend as we saw on the original Arla/Express Dairies merger.

We shall see.

[tiredoldbroker] 28/11/2006 14:38

Gerry, there's just one problem with your idea that Arla amba (A/A) might have set up a deal with a number of different investors all using nominee accounts, where they all bought non-declarable stakes and A/A promised to buy them out at a guaranteed profit, and that is....

that such a deal would not only break the code on takeovers and mergers, it would also be a criminal offence (conspiracy) and if word of it ever leaked out, a good few people (including any bankers or advisers who helped set it up) would have to accept that they'd be looking at the end of their City careers and possible getting used to prison food for a nice stretch. Also, any buying during an offer period (which is what ARU is now in) by, or on behalf of, or guaranteed by, the bidder would also have to be declared each day, and failure to do so would also be another punishable breach.

I know that there are people in the City prepared to do dodgy things but I really don't believe that the compliance officers of numerous institutions would all decide to lie through their teeth, knowing that they could be making themselves unemployable.