Sunday, January 4, 2015

Fwd: Kellogg wins price war with Abraaj to acquire Bisco Misr - Positive

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From: "NAEEM Research" <>
Date: January 4, 2015 at 12:07:31 GMT+1
To: "Research.brkeg" <>
Subject: Kellogg wins price war with Abraaj to acquire Bisco Misr - Positive

Naeem Analysis

Egyptian Company for Foods/Bisco Misr




   Egypt Ÿ 4 January 2015


Kellogg wins price war with Abraaj to acquire Bisco Misr - Positive 

      Global food producer Kellogg Co. offered EGP89.86/share for Bisco Misr (BISM) on 24/12/2014, surpassing Abraaj Group's last offer price of EGP88.09/share. Post the Kellogg offer, Abraaj announced that it withdrew from the race to acquire BISM

      The Egyptian Financial Supervisory Authority (EFS) has extended the mandatory tender offer period by five working days, starting from the day after 31/12/2014 to 11/01/2015

      The background - the latest move by Kellogg, comes as part of a bidding war with Abraaj to acquire BISM, which started back in November 2014. Abraaj first made an approach to buy at least 51% of Bisco Misr at a price of EGP73.91/share (with 56% of BISM shareholders then agreeing to sell). This was followed by multiple counter offers made by each of the parties, with Kellogg making its previous offer at EGP86.36/share, only to be countered by Abraaj (at EGP88.09/share). BISM was supposed to have also been approached previously by JUFO and Savola group

Our take – Positive

      The latest offer price of EGP89.86/share, represents a total equity value of EGP1,033m for 100% of Bisco Misr – 22% above the first initial offer made by Abraaj at EGP73.91/share

      Annualising BISM's 3Q14 results, the offer price (excluding available cash in the B/S) implies a 2014e P/E of 15.3x and price-to-sales of 1.9x  

      BISM has a strong B/S with available net cash of EGP44m as of September 2014 – representing EGP3.8/share. Net of cash, the effective cost of acquisition would amount to EGP989m or EGP86.0/share for Kellogg – Implying a forward P/E of 14.7x; a decent premium (of around 20%) compared to EGX30 and MSCI EM multiples

      While viewing this definitely as good news for BISM shareholders and, for similar such companies exposed to the consumers space in Egypt, this to us also implies increasing interest in M&A activity in the country - indicating to us, foreign investors' risk perception on Egypt, to an extent having shifted over the past one year; a result of political stability, better security and, improving macro-economic indicators. Overall, some foreign investors seem to perceive this to be an ideal time, in order to be favorably exposed to Egypt's fundamental dynamics being on a path of recovery

      We await to see the next move by Kelloggs to complete the acquisition of BISM





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