Meat casings firm Devro agrees Dutch takeover
Scottish meat casings maker Devro has agreed to be acquired by a Dutch food company owned by one of Germany’s wealthiest families in a deal valuing the company at £540m.
Netherlands-based Saria, part of the Rethmann group, is paying 316.1p a share for the Moodiesburn business, which has been listed on the stock market since 1993. The deal has an enterprise value, including debt, of £667m.
The price represents a 65% premium to Thursday’s close and was sufficient to gain the backing of the Devro board. Today the shares closed 119p, or 62% higher to close at 311p.
Odyssean, an investment trust, bought a 1.95% stake just before the bid was announced, according to a stock exchange filing.
Saria, a family-owned business, which already distributes Devro products in Brazil, is one of four completely independently run and ring-fenced divisions of Rethmann group which owns water treatment, agriculture and food production and transport logistics assets.
The bidder said it intends to invest in Devro’s seven manufacturing sites to increase their capacity.
Steve Good, chair of Devro, said: “The Devro board believes that the offer from Saria, which represents a premium of 92% to the closing price on the last Business Day before receipt by the board of Bidco’s conditional indicative proposal, reflects the strength of Devro, our medium-term prospects, and recognises the substantial improvements made to the company through the successful implementation of our growth strategy.
“The offer also provides an opportunity for Devro shareholders to crystallise, in cash, the value of their investments at a fair and reasonable value.
“Furthermore, under the ownership of Saria, the combined business will have an enhanced product offering; will be a stronger more diversified group of scale; and will look to further accelerate long-term sustainable growth.
“We believe that Saria’s understanding of our markets, its strong financial position and the cultural fit will benefit the Group’s business and employees. As a result, the Devro Directors have agreed unanimously to recommend that Devro’s shareholders accept the offer from Saria.”
Harald van Boxtel, chief executive of Bidco, said: “The proposed combination of Devro and the Saria group will bring together two leading international businesses with complementary product portfolios, particularly in the sausage casings market, providing a platform for sustainable and scalable growth in highly attractive and dynamic categories.
Devro has built a reputation for manufacturing high quality products and providing a service to a customer base that is complementary to the Saria group’s. The combined businesses would be ideally placed to capture growth in both mature and emerging markets by maximising the combined sales and distribution platform, an improved research and development function and a wider range of products.
“We are excited by the opportunity to invest further in Devro’s facilities and team over the long term and deliver a range of benefits to employees, customers and suppliers alike.”
JP Morgan Cazenove and PwC were financial advisers to Saria. Devro’s financial adviser was Lazard, while Numis Securities was its corporate broker.
Russ Mould, investment director at AJ Bell described it as a “very generous takeover deal” with the takeover price putting the shares back to levels not seen since 2015.
“Devro has been plagued by profit warnings over the years, but it’s had a habit of bouncing back. While its latest half year results showed profits slipping, the company was confident about the full year,” he said.
In an update this morning Devro said trading was strong in the period 30 June to 31 October with reported revenue growth of 16% (10% at constant currency) compared to the prior year period.
The board said the full year outlook is slightly ahead of its expectations, underpinned by a robust performance and foreign exchange tailwinds.
Constant currency revenue growth was driven by higher pricing, successful recovery of inflation, as well as good volume increases led by the Moodiesburn company’s mature markets.
“Volume growth continues to reflect the successful execution of our strategy. Operating margins in the period were up on the prior year and well ahead of those achieved in the first half,” it said.
Mature markets were strong with continued growth in North America and Continental Europe. Emerging market growth was particularly strong in the Middle East and Africa and South East Asia however, as expected, the termination of sales to Russia impacted overall progress for this region in the period.