United Malt Group has attracted a $1.5bn takeover bid from French rival Malteries Soufflet

United Malt says it was first approached with a $4.15 per share takeover from French malt giant in December and eventually got that pushed up to $5 a share.

The takeover is a cash offer by way of a members’ scheme of arrangement.

United Malt Group, the world’s fourth largest maltster and a key supplier of crucial malt ingredients to the beer, craft beer and whisky companies, has entered exclusive discussions with French malt giant Malteries Soufflet over its $1.5bn takeover bid for the Australia-based agri company.

But already there seems to be a split among major United Malt shareholders as to whether the indicative takeover proposal, pitched at $5 per share, is a fair and reasonable price for a company that has struggled financially recently or a steal that will see irreplaceable global malting assets lost to a French multinational.

United Malt, that was demerged from Graincorp three years ago, is the world’s fourth largest maltster and has facilities across Australia, Britain and North America including a newly expanded distilling plant in Inverness, Scotland, which has had $50m invested in its expansion. Malteries Soufflet, one of the top three operators in the global malt industry and a subsidiary of leading European agricultural group InVivo Group, will become the world’s largest maltster if it’s grab for United Malt is successful.

It was revealed on Tuesday as United Malt came out of a trading halt and revealed details of the takeover approach that Malteries Soufflet had first approached the United Malt board in December with an indicative offer set at $4.15. Between then and March it pushed the price up to $5 per share which was eventually enough to get the board to proceed.

The company announced to the ASX on Tuesday that it had entered into a process and exclusivity deed with Malteries Soufflet following it submitting a conditional, non-binding and indicative proposal to acquire all of the ordinary shares on issue in United Malt for $5 per share.

Shares in United Malt leapt on the bid, rising more than 30 per cent to $4.64, still below the $5 offer as the market hedges its bets about the ongoing talks that now will take place.

United Malt chairman Graham Bradley told The Australian the unveiled and indicative $5 per share offer was the product of months of talks and that for ten weeks the French suitor will have an exclusivity period. For the first four weeks United Malt is precluded from talking to other potential bidders but after that the board can entertain discussions with any other party that comes forward with a materially superior proposal.

“We have we in our agreement to provide the new diligence … that if the price is confirmed, we are committed to recommending it to shareholders. If however the price is different or lower, we are not so bound.”

It comes as United Malt’s share price had fallen as much as 35 per cent since the start of 2022 as a string of profit warnings and poor financial performances saw the share price sink. This likely attracted acquirers with Malteries Soufflet now pouncing to take advantage of United Malt’s recent financial missteps.

United Malt major shareholder Tanarra Capital could create a stumbling block for the takeover bid.

The $5 takeover offer for United Malt represents a 45.3 per cent premium to the last closing price for the stock when its shares went into a trading halt on Monday. Late last year as the weight of its profit warnings and poor results hit the company United Malt shares fell as low as $2.85.

But already there is a divergence of opinion among some United Malt shareholders on the merits of the offer. Investors Mutual portfolio manager Simon Conn, whose fund has just under a 5 per cent stake in the company, said the $5 offer “looked like a good outcome”.

“I think it looks like a good outcome, clearly the earnings have been impaired by some pretty extraordinary events over the last couple of years, like Covid and supply outages in Canada which have certainly had an impact.

“The business is on its way back to hopefully earning a little higher number in terms of where they have guided to for this year and what they’re looking for next year – I think in terms of that it looks like a reasonable (takeover) multiple.”

United Malt’s largest shareholder Tanarra Capital could create a stumbling block for the takeover bid however. It bought a 5.44 per cent stake in the maltster in late 2021. It has since built up its stake to 10.8 per cent.

Tanarra Capital founder and chief executive John Wylie, reflecting on the looming takeover bid on Monday – before the offer price was unveiled on Tuesday – lamented the disappearance of quality companies from the public markets.

“Quality companies that are either undervalued at a point in time or that are just underperforming and not delivering the right returns to shareholders are susceptible to being picked off and taken into private ownership,” Mr Wylie, the former local boss of Credit Suisse, told The Australian.

He also commented about the shrinking pool of public companies to invest in as businesses such as United Malt are courted by overseas private entities.

“And quite often the funds that take these companies private are owned by offshore limited partners. That reduces the access for Australian investors to invest in quality Australian public companies.”

Thierry Blandinières, chairman of Malteries Soufflet and CEO of InVivo said the acquisition of United Malt was a unique opportunity to reinforce its presence in the high-value craft beer market, expand its geographical footprint to new strategic markets, and accelerate its ambitious strategy in the malt sector.

“A larger global platform would also enable customers to access increased resources and support their own growth ambitions. This acquisition would be a key step in our journey to becoming a global leader in the malt sector.”