Arla Foods Uk Share Discussion Threads

[gerry321] 22/1/2007 18:27

Has there been any rumours of a counter bid from Europe.......?
all they need is to spend around £55m..... block the deal and squeeze another 10p to go away

[gerry321] 22/1/2007 15:58

miserable sods
I for one will vote against

[damofarl] 22/1/2007 14:58

71 p it is and no dividend!

• The boards of Arla Holding and Arla Foods UK announce the terms of the
recommended acquisition by Arla Holding of the 49 per cent. of Arla Foods UK it
does not currently own at a price of 71 pence per share in cash (the
"Acquisition").

• The Acquisition price values the entire existing issued share capital
of Arla Foods UK at £434.5 million and the shares not owned by Arla Holding at
£212.9 million.

• The Acquisition price represents a premium of 22.4 per cent. to the
Arla Foods UK share price before discussions were announced on 20 October 2006
and a premium of 43.5 per cent. to the average share price over the 3 months
prior to the announcement concerning discussions.

Under the terms of the Acquisition, Arla Foods UK Shareholders will not be
entitled to Arla Foods UK's proposed final dividend of 0.8 pence per Arla Foods
UK Share in respect of the financial year ended 30 September 2006. The Board of
Arla Foods UK has undertaken to seek the approval of the Arla Foods UK
Shareholders at the Arla Foods UK Annual General Meeting to be held on 27
February 2007 to adjourn the resolution to approve the payment of such proposed
final dividend. No further dividend will be paid or declared and the Board of
Arla Foods UK will not reconvene a meeting to consider the adjourned dividend
resolution unless the Scheme does not become effective in accordance with its
terms.

The Loan Notes, which will be governed by English law, will bear interest (from
and including the date of issue of the Loan Notes), payable every six months in
arrears on 31 March and 30 September in each year at a rate of 0.75 per cent.
below LIBOR, such rate to be determined on the first business day of each
interest period. The first interest payment date will be 30 September 2007 in
respect of the period from the date of issue of the Loan Notes up to and
excluding that date.

The Loan Notes will be redeemable at par (together with accrued interest) for
cash at the option of the holders, in whole or in part, on each interest payment
date from (and including) 31 March 2008. Arla Holding will redeem all
outstanding Loan Notes at par (together with accrued interest) on 30 September
2012. Arla Holding may redeem outstanding Loan Notes at par (together with
accrued interest) earlier if, at any time after the first interest payment date
following the first anniversary of the date on which they were issued, 25 per
cent. or less of the aggregate nominal amount of all Loan Notes issued in
connection with the Scheme remains outstanding.

2. The Scheme will be conditional upon:

(a) approval of the Scheme by a majority in number of Arla Foods
UK Shareholders present and voting (and entitled to vote), either in person or
by proxy, at the Court Meeting representing 75 per cent. or more in value of the
Arla Foods UK Shares voted;

Votes attaching to Arla Foods UK Shares controlled by Arla Holding or persons
acting in concert with Arla Holding will not be exercised at the Court Meeting
or at the EGM.

Expected timetable of principal events:

Posting of Scheme Document 15 February
Court Meeting/EGM 12 March
Scheme Hearing 2 April
Capital Reduction Hearing 4 April
Effective date of Scheme/Capital Reduction 5 April
Latest date consideration posted to shareholders 19 April


.........

I think I'll pass on the loan note option! D.

[damofarl] 17/1/2007 15:07

tiredoldbroker; i don't disagree with the financials...whatever way you look, yield/operating margin/ROCE, ARU are bettered by their direct competitors, RWD DCG. I guessed 72, so I'm not unhappy, to my mind on current info its a fair (but not generous)price. We differ in that of the three i believe ARU had the best prospects for profit/sp improvement going forward, but as you rightly suggest, the future is unquantifiable, the past is fact. A bird in the hand is worth 2 in the bush comes to mind!

Gerry, "...lets move on ..........This BB may be wound up in a month.." ,....Not at the rate Amba work! D.

[gerry321] 17/1/2007 12:48

C`mon guys youv`e both had a good kick at the ball

lets move on ..........This BB may be wound up in a month..

for what its worth......(probably nothing)
my hunch is that there will be an extra special divi of 2p or 3p on the grounds that stating 71p now without making it a formal offer is a tactical ploy to guage PI reaction and dampen expectations of 75p +
It wouldnt cost a fortune to add a little bit more........2p would only be £6m

[quepassa] 15/1/2007 21:38

Hi Tiredoldbroker. Not ignoring you or your points. - Whilst I respect what you say, I just totally disagree.

By the way, if one didn't know better one could imagine that you are either shorting the stock or just working for one of the amba advisory groups!

I presume that Arla amba don't think that Arla UK have "...limited and erratic prospects...." otherwise they wouldn't want to buy them.

On the contrary, Amba see the perfect strategic fit, dynamic growth prospects, and great synergies to be had with Arla UK and that is why they are so keen and want to buy the remaining 49%.

So, we know that it is agood fit but have different views about the price. And 71p is nowhere near the mark. It is a lower market price than the company enjoyed in the stock-market in mid-2005. Since then, Arla UK has suffered enormously by association with amba because Arla Denmark was hit broad-side by the Middle-East cartoon affair which in turn dragged down Arla UK.

I also have the impression that more emphasis has been given to the well-managed release of bad news in Arla UK over the last year than the not inconsiderable good news, which has also suppressed the price.

I also feel that the Board of Arla UK are negotiating with handcuffs on as both the Managing Director and Deputy Managing Director of The Acquiring Company sit on the Board of The Target Company. Now, even you would admit that this is not a particularly helpful state of affairs for shareholders in Arla UK, even if messrs Tuborgh and Lundby are meant to be out of pricing discussions.

A suggested 71p is woefully low and inadequate and completely undervalues Arla UK. I will continue to air views that this is the wrong price and believe that it is an unacceptably low price perhaps influenced in part by the fact that the MD and Dpty MD of the Acquiring Company are on the Board of Arla UK.

[tiredoldbroker] 15/1/2007 19:58

QuePassa, I think you are ignoring my point here. You again refer to DCG being on a p/e of 24, but you fail to make valid comparisons. That p/e relates to DCG's eps in the year to 31/3/06 and is the unadjusted eps - i.e. you have chosen the lowest possible basis for earnings for DCG without doing a comparable exercise for ARU.

Even in that period, DCG reported adjusted eps (i.e. adding back exceptionals, just like ARU does) of 40.3p. You ignore the corporate activity by DCG since 31.3.06, including the deal to buy Express' doorstep business (described as "highly earnings accretive" for DCG), the sale of its commodity cheese business, and the very substantial St Hubert purchase.

Partly due to these deals, DCG can put forwards a good case for steadily rising eps - from 40 in 2006 to 45 in 2007 and 52 in 2008, and better quality of earnings as well.

If you were to have a fairly similar look at ARU you could say that in the year to Sept 05 ARU had earnings of 1.9p unadjusted - in which case the exit p/e at 71p would be over 37 ! For the year to Sept 06 ARU still only reported basic eps of 2p, ignoring the loss on discontinued operations, so the p/e for ARU comparable to the p/e of 24 you keep quoting for DCG is either 35 or 37, depending which year you take for comparison. If you want to base ARU's exit price on adjusted eps, you have to adjust DCG's eps the same way. In which case, ARU is still going out on a premium to DCG.

So however you look at it, if you make a level playing field comparison, ARU is exiting on a higher p/e to that of DCG. But the basic fact remains that neither you nor anyone else have put forwards factually-based forecasts of higher future eps for ARU, and a business will, at the end of the day, have a value which is a multiple of earnings. For ARU, with limited and erratic prospects, and a patchy record, an exit p/e of over 14 is really quite a good price, and you have yet to show otherwise.

[damofarl] 15/1/2007 17:40

quepassa, agree no one would rock the boat, especially if they want a lucrative number on amba's advisory board. Unfortunately for the small pi's, thats business and thats life. The increasing success IS down to Amba, and one has to accept and not lose sight of that; without them they would have continued to drift, bullyied by the ruthlessly efficient RWN and even Dairy Crest.

With regards to Dairy Crest p/e of 24, i would suggest we were more akin to them than RWN with the parallels of milk, butter, spreads , and also in terms of efficiency, but as tiredoldbroker said, and i agree, i can't see another deal coming. Call me cynical but the way i see it Amba have got an earnings generating free distribution platform for their own cooperative member produced products. I for one will take the 71+divi and put the money somewhere else, thank you very much. Any profit IS a GOOD profit. D.

[tiredoldbroker] 15/1/2007 17:34

QuePassa, you say that Dairy Crest are on a p/e of 24 but the fact is that for the year to March 2007 they are forecast to have eps of 45.1p per share, rising in the year to March 2008 to 52.3p, so the prospective 2008 p/e at Dairy Crest's current 651p share price is around 12.4.

For ARU, with a September year end, the forecast for 2008 (six months further away than for DCG) is 5.39p so the p/e at a 71p exit price would be 13.2. So ARU is going out on a premium to DCG, even though ARU already has a controlling shareholder, which effectively excludes any third party offers.

ARu has a record over the last few years of really quite patchy earnings, even when "normalised" to reverse the exceptional items (which come up every year so are hardly exceptional any more !). An exit p/e of more than 14 times this year's forecast earnings seems like quite a full price, the rate of growth forecast is hardly stratospheric and frankly the exit p/e is higher than for many stocks showing real growth and a decent record. By all means refuse to accept the offer, you'll just become a dissenting shareholder with the offer proceeds held in an account until you do accept, with you unable to access the cash for reinvestment. So I don't see how you'll benefit or what the financial justification is.

[quepassa] 15/1/2007 16:49

From a shareholders' point of view, it is not exactly an ideal set of circumstances when the Managing Director and Deputy Managing Director of the Acquiring Company, namely messrs. Peder Tuborgh and Andreas Lundby of Arla amba, already sit on the Board of the Target Company, Arla UK.

No-one would rock the boat too much on price on that one if you fancied a long-term future career in Arla Foods UK.

[quepassa] 15/1/2007 15:58

Clara Furse where are you?

[quepassa] 15/1/2007 15:55

Whichever corporate finance house it is that has been advising the Arla UK Board have done a very bad, if not appalling, job for shareholders. This is a very low and unacceptable price.

I feel distinctly uncomfortable with Arla amba directors sitting on the Board of Arla UK when there has been a take-over in play, even if the Directors were meant to be behind a chinese wall.

Dairy Crest are trading on a p/e multiple of 24 times. A suggested figure of 71p for ARU is nowhere near this. An offer of 71p ought to be rejected outright.

I will personally vote against and not support any offer at this price as I believe it represents bad value for share-holders.

[damofarl] 15/1/2007 15:43

tiredoldbroker; posts crossed- agree with your comments..i think traders could push the share price up a couple of pence though...amba control the reins, and only they choose the direction . D.

[damofarl] 15/1/2007 15:35

Gerry,

'a higher bid which is unlikely without a counter bid by a 3rd party'...

I think its unlikely they'll be a counter-bid, but if there was, i would fully expect amba to up theirs to whatever is required. It has more strategic/economic value to them than anyone else. i think theres an upportunity for a broker to take a quick large buy/sell punt on this basis, and push the share price up forcing amba's hand.

'This could only lead either to an impasse and no bid ...' that would suit me just fine. If your a trader, you've made a great 4 mth 45% gain, and will take the profit (and who can blame them!). But i think theres more upside long term. D.

[tiredoldbroker] 15/1/2007 15:25

Given that Arla amba own over 50% of the shares in Arla UK, just what use do you imagine a rival offer would be ?

I've never seen any suggestion that A/A wants to sell out and abandon the UK market, they are under no obligation to accept an offer for their shares from anyone else, and I can't see that any third party would incur the unavoidable costs involved in making an offer for ARU, when it knows it isn't going to succeed. You can hardly go from asserting that ARU is vital to the whole European strategy of A/A to sugesting they are going to sell out without putting forwards some pretty persuasive explanation.

Lets make this quite clear - no bid from A/A or someone trying to launch a spoiler to stop A/A is NOT going to result in a higher price for ARU.

[gerry321] 15/1/2007 14:35

Come to think about it....
........One way to cheer up those who were depending on their ARU divi coming on time and not late would be to offer them an extra divi......

[gerry321] 15/1/2007 14:26

Hi all
I`m also disappointed by 71p when I expected 75p and hoped for 80p........

After all the time since 20 Oct why havent Amba come straight out and announced a formal offer.....??
Instead we have an update which says in effect that if they are going to bid it will be 71p per share....
All it would take to spoil this deal would be for a 3rd party to buy say 10% of the shares in the free market for over 71p and Amba are up the creek with their 71p offer
Therefore I read this statement as an attempt to flush out a reaction from the two big holders Perpetual and the Milk Partnership (totalling 22%) and the rest who make up around 23% of the market
If we believe that Perpetual and the Milk Partnership have been left out of these negotiations then the announcement provides an opportunity for them to be brought in now......
This could only lead either to
an impasse and no bid
a higher bid which is unlikely without a counter bid by a 3rd party
a special divi plus 71p..........which is where I hope we end up
.....in the 75p to 80p range

[damofarl] 15/1/2007 12:42

quepassa; as i said before 72 was based on year high, and i fear that aru's response will be to you, that which amba put to them in 'agreeing' price.....the price is a 50% premium to pre announcement and a 12 month high (i think there will be a special divi), which in black and white represents a fair premium. We on here have argued before that the share price was engineered down by the heavy investment in plant (now finished, surprise, surprise). If they had merely churned assest, profits would have been higher for the last 2 years, and the share price would not have drifted down so much against both the market and their competitors. On that basis if the share price was say 60, and they approached with the current premium, 90 would have seemed 'generous', wouldn't you say? ARU also 'invested' a lot in winning major supermarket contracts, at low margin/cost to prove to the major retailers that they could deliver the national service required by them (previously, it was a bit regionalised). ARU have delivered on these contracts and their service is highly rated by these customers. In such a commodotized product, i think the service will give them leverage on contract renewals, at better margins, allowing their status as the 'biggest' to flow through in profit as well as volume. Also, ARU's drive to cut costs, prompted by the oil hike last year is starting to pay benefits...they use to pay people to take the rubbish away...now they get paid, just an indicator of the attention to detail which is sweeping through ARU, driven by amba's ETT Arla programme ('One Arla').

I'm sure others have spotted the value, but with amba's holding and milk market share it won't be a uk dairy concern. Cashflow might attract someone, but i don' see any hidden property value (Stourton is a sale and leaseback), so I don't see private equity. That leaves say a European dairy/food combine? I don't know why amba/Camprini talks fell through, but if Camprini were to bid for Aru, it would put them in a strong position vis-a-vis amba would it not?

One thing that came out ofthe weekend press was the price, so at least we were right that that wasn't the sticking point (Farmers Weekly says its the pensions)! Frankly, 71 plus share price divi is a done deal, and theres no option but to take the money...quepassa...we'll have to see if theres another share out there we have a common interest in soon! I hope you've done well on this (although I would have liked another 18 months). D.

[tiredoldbroker] 15/1/2007 12:02

Or as I've been saying since 31st October last (& repeated the reasoning on 28th Dec):

"tiredoldbroker - 31 Oct'06 - 11:18 - 302 of 436

...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."

So I'm hardly surprised by the latest news. The underlying numbers have always suggested a price in the 70-72p range and nobody has put forwards radically different profit or cashflow statistics to support any other price.

[quepassa] 15/1/2007 11:43

no. very good guess. well done.

but i will certainly be letting the Company know that i feel that this would be a wholly unacceptable price and as a shareholder do not in any way feel that this represents fair value to share-holders.

let's hope that another party spots the value and comes forward with a higher price.