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

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From: "NAEEM Research" <research@naeemholding.com>
Date: January 4, 2015 at 12:07:31 GMT+1
To: "Research.brkeg" <brkeg.res@naeemholding.com>
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

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	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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