Bellamy’s Enters Scheme Implementation Deed; Stock Zooms ~55% on ASX

Bellamy’s Australia Limited updated the market on 16 September 2019 regarding a Scheme Implementation Deed with China Mengniu Dairy Company Limited, owing to which the ASX-listed stock soared up by 54.928% and closed at $12.89 by the end of the day’s trading on 16 September 2019. The closing price of BAL was towards its 52-week high price.

With a market cap of $1.46 billion and approximately 113.37 million outstanding shares, the stock of BAL settled at $12.970 on 17 September 2019, up 0.621% by $0.080 from its previous closing price. Nearly 7.77 million shares of the company traded on the ASX.

On the similar notes, S&P/ASX 200 Consumer Staples (Sector) closed at 12,501.8, up 54.5 basis points or 0.44%, while the benchmark index S&P/ASX 200 edged up by 21.8 basis points or 0.33%, settling at 6,695.3 on 17 September 2019.

Let us have a detailed look at the scheme implementation deed entered between BAL and Mengniu, owing to which its share price zoomed by ~ 55%. Additionally, let us touch upon other two major players in the related space – The A2 Milk Company Limited and Blackmores Limited.

Bellamy’s Australia Limited

Bellamy’s Australia Limited (ASX: BAL) is a consumer staples sector player that was founded by a Tasmanian mother in the year 2004. BAL is a producer as well as distributor of branded food products for babies, toddlers and children that are wholesome, nutritious and made in Australia.

The ingredients used by the company in its products are of high quality, as they come from the farmers and producers who are abiding by the highest certified organic practices.

Products:

Scheme Implementation Deed:

Bellamy’s Australia Limited reached a scheme implementation deed with China Mengniu Dairy Company Limited (Mengniu). As part of the scheme implementation deed, Mengniu would be acquiring the entire issued share capital of Bellamy’s. In case the scheme implementation deed proceeds, then the shareholders of BAL would be receiving a total of $13.25 cash per share. The breakup of this consideration is as follows:

  • $12.65 cash each share from Mengniu under the scheme implementation deed.
  • Remaining $0.60 per share would be in the form of a special dividend to be paid by Bellamy’s before the execution of the scheme. The dividend will be fully franked.

The total cash amount would value the shares of BAL at ~$1.5 billion. The cash offer of $12.65 per share represents 59% premium to the closing price of the BAL stock on 13 September 2019, and a 54% premium to the 3-month volume weighted average price to 13 September 2019.

The Board of Directors of BAL have made a unanimous recommendation that the shareholders of the company should cast their vote in favour of the scheme in the absence of any better proposal. The implementation of the scheme is subject to a report from an independent expert, confirming that the scheme would be in the best interest of the shareholders of BAL. All the directors who hold shares in BAL intend to vote all their shares in favour of the scheme.

The scheme implementation deed between both parties depends on various terms and conditions. The implementation of the scheme would require Bellamy’s shareholders’ approval. Other than the shareholders’ approval, implementation of the scheme would also require the approval of the Court and the Australian Foreign Investment Review Board (FIRB).

About China Mengniu Dairy Company Limited:

China Mengniu Dairy Company Limited ranks among the leading dairy product manufacturers in China. The company with a market cap of ~ $24.6 billion is listed on the Hong Kong Stock Exchange. Mengniu and its units are engaged in the production as well as distribution of premium dairy products in China, with manufacturing sites in Indonesia as well as New Zealand.

The products of Mengniu are distributed in various regions beyond China via its overseas sales network. The company caters to markets including Hong Kong, Singapore, Macau, Myanmar and Indonesia.

The A2 Milk Company Limited

The A2 Milk Company Limited (ASX: A2M) targets global markets with its branded dairy and infant formula products. The company operates as a manufacturer, marketer and seller of these products.

On 17 September 2019, the stock closed the day’s trading at $13.100, down 3.676% from its previous close with a market cap of $10 billion. The YTD return of the stock stands at 30.77%.

Investor Strategy Day Presentation:

On 17 September 2019, A2M released its Investor Strategy Day presentation. The company in the presentation highlighted its past extraordinary experience.

In the next phase of its evolution, the company would be pursuing two biggest consumer markets in the world.

A2M would maintain its key focus on core markets and existing products. New products and new markets would be at the second and third place, respectively, in terms of the company’s focus.

The A2 Milk Company would also continue to invest in increasing and deepening its consumer understanding and engagement. It would focus on the adaptability to continue to evolve the settings of its changing business and preservation of passionate belief and the core values of the company’s culture.

In the past five years, The A2 Milk Company has seen continuous growth with respect to revenue and earnings. Growth in fresh milk remains the highest since FY2015 with a value market share of 11.4%. The company also reported an increase in brand awareness as well as highest loyalty of any other milk brand.

A2M would be accelerating its focus and investment in Greater China. China is amongst the big and complex consumer markets and has a strong regional influence. The Asian country also has the biggest, most dynamic retail landscape in the world.

Blackmores Limited

Blackmores Limited (ASX: BKL) is a leading natural health solutions company in Australia with a market cap of $1.46 billion (as on 17 September 2019). The company provides a total of 179 products. BKL holds proficiency in vitamins, minerals, herbs as well as nutrients, owing to which it develops products and services that have a natural approach towards health.

On 17 September 2019, the stock of BKL settled at $81.940, down 2.452% from its previous close. The one month return of the stock stands at 25.54%.

Full Year Results:

On 15 August 2019, Blackmores Limited released its full year results for the year ended 30 June 2019. Its full year revenue increased by 1% to $610 million as compared to FY2018. Net profit after tax declined by 24% to $53 million as compared to the last financial year, while underlying full year NPAT declined by 19% to $55 million.

Sales increased by 30% and EBIT went up by 218% in other markets in Asia. Total ordinary dividend in FY2019 stood at 220 cents per share (fully franked).


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