WhiteWave Trading Above Danone Buyout Price As Potential Seen For Competing Bids
Shares of WhiteWave (WWAV) are rallying after the company announced it has agreed to be acquired by Danone (DANOY) . While RBC Capital analyst James Edwardes Jones sees the deal as expensive, Jefferies analyst Akshay Jagdale believes the premium paid by Danone is below average, which may open the door to other potential bidders.
MERGER AGREEMENT: Danone and WhiteWave announced that they have entered into a definitive merger agreement under which Danone will acquire WhiteWave for $56.25 per share in an all-cash transaction, representing a total enterprise value of approximately $12.5B. The transaction has been unanimously approved by the boards of both companies. Its price represents a premium of approximately 24% over WhiteWave's 30-day average closing trading price, $45.43.
EXPENSIVE DEAL: RBC Capital's Jones believes Danone's acquisition of WhiteWave is "entirely consistent" with its strategy, given that the latter possesses a series of organic and dairy alternative brands which in his view should sit well within Danone. However, Jones noted this is an expensive deal. The analyst estimates the acquisition will increase Danone's sales by about 20%, EBIT by 24% and earnings per share by 10% if the company can meet its goal of achieving $300M synergies. Additionally, he expects Danone's ROIC on the deal to come in at 2.8% before synergies and 4.4% after synergies. RBC Capital has an Underperform rating and $60 price target on Danone's shares.
OTHER POTENTIAL SUITORS?: In a research note this morning, Jefferies's Jagdale pointed out that the 24% premium Danone is paying for WhiteWave Foods is below the 30% premium typically seen in takeout bids, which combined with the fact that the latter has widely been considered a buyout candidate may result in other potential bidders entering the fray, such as General Mills (GIS) - Get Report , PepsiCo (PEP) - Get Report and Coca-Cola (KO) - Get Report . The analyst raised his price target for WhiteWave to $56 from $53 and reiterated a Buy rating on the stock.
PRICE ACTION: In morning trading, shares of WhiteWave have gained about 19% to $56.38, while Danone's stock trading in New York has advanced about 2% to $14.45 per share.
OTHERS TO WATCH: Shares of Mead Johnson Nutrition (MJN) , said previously to be the target of potential takeover interest by Danone, are down about 1% to $88.14. Meanwhile, Hain Celestial (HAIN) - Get Report , which operates in the same natural/organic space as WhiteWave, has jumped nearly 9% on the heels of WhiteWave's acquisition announcement.
Reporting by Jessica de Sa-Mota.
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