Current Price – NZD1.16
Merger Consideration - NZD1.23 + NZD0.04 in dividends
Upside – 10%
Expiration Date –August 25th, 2018
This idea was shared by Vladimir.
Very straightforward situation in my view, so I will be very brief in describing it.
Bounty Fresh Food made an offer to acquire Tegel Group at NZD1.23 per share (transaction value of c. NZD440m) plus offer also permits TGH to pay a cash dividend that does not exceed in aggregate 4.1 cents per Share without this affecting the Offer price for Shares. Current spread including dividend stands at 10%. Offer expires on 25th of August 2018.
- Bounty Fresh Food receives acceptance of no less than 50% of TGH shares
- All consents in regards to Overseas Investment Regulations
- No leakages, changes in constituent documents or significant revision of the guidance
Bounty Fresh Food already owns 13.5% of Tegel Group. On top of that largest shareholder Clarus Investment owns 45% stake and has entered into a lock up agreement to sell the shares under the offer. Given that together these holdings represent more than 50% ownership the first condition will be satisfied.
From the offer doc:
"Further, Claris Investments Pte. Ltd (the largest shareholder in TGH) has irrevocably agreed to accept the Offer in respect of all the Shares held or controlled by it (representing 45.00% of the voting rights in TGH). Given Bounty Fresh already holds and controls Shares representing 13.49% of the voting rights in TGH, upon Claris Investments Pte. Ltd accepting the Offer, the minimum acceptance condition set out in the Offer will be satisfied."
It is hard for me to come up with any good explanation why the current spread exists other than it is a micro-cap in New Zealand. I don’t think that the risk of the offer not going through is particularly high in this case.
Company is also listed on Australian Stock Exchange and appears to trade at the same price, just in Australian dollars.
Tegel Group Holdings Limited (NZSE:TGH) engages in the breeding, hatching, processing, marketing, and distribution of poultry products in New Zealand. The company offers value added main meals, snacks, and convenience meal options; sausages, and processed meat products; and turkey and beef products, as well as fresh and frozen whole chickens, fillets, and portions. It also manufactures and markets a range of other processed meat products. The company markets its products under the Tegel, Rangitikei, and Top Hat brand names. The company also exports its products under the Pure New Zealand Premium Chicken name. Its value added convenience products include fresh value added, cooked, and smoked small goods, as well as frozen further processed products through channels, such as retail grocery, foodservice/industrial, and quick-service restaurants.
TGH has historically profitable growing business, which currently trades at c.8.0x EV/EBITDA and 13.2x P/E. Company also pays dividends, so at least at the first glance looks like a solid business.
Bounty Fresh Food, Inc. owns and operates a commercial broiler hatchery. The company is based in Caloocan City, the Philippines.