$670m buyout ‘undervalues’ Asaleo: Spheria

Asaleo was on the verge of a major re-rating under its new management team, according to one of its biggest backers.

Asaleo Care has seen strong retail demand for its feminine hygiene products, including Libra, which it manufactures in Victoria.

Another major investor in Asaleo Care has hit out at the proposed buyout by major shareholder Essity, adding pressure on the Swedish consumer goods giant to sweeten its bid or walk away.

Spheria Asset Management argues the company was on the verge of a major re-rating under its new management team.

The planned bid, outlined on Thursday, values Asaleo at almost $670m. The proposal is pitched at $1.26 a share in cash, less any first half dividends paid by Asaleo.

Essity has a market capitalisation of $185bn krona ($29bn) and its portfolio of personal hygiene and cleaning products are sold around the world.

“With all due respect to Essity, their proposed offer for Asaleo is derisory, and as such we have no intention of accepting as we believe the company is fundamentally worth more than $2.00 per share excluding any synergies Essity would likely achieve from consolidation and delisting,” said Matthew Booker a portfolio manager at Spheria.

Spheria is ranked among the top investors in Asaleo with a near 7 per cent stake, according to company filings. Asaleo closed on Friday at $1.29 a share. It was trading at $1.01 a share before the bid become publish late Thursday.

Mr Booker believes that in the absence of this bid Asaleo “was on the verge of a significant re-rating” under a relatively new management team that he says has de-risked, invested and positioned the company for sustainable growth.

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“Essity we are sure share the same views and have greater insight given their board representation”.

“We will be more than happy if Essity walk away from this bid and Asaleo management can then continue with their growth agenda which we believe will deliver more significant returns to shareholders in a relatively short time frame.”

His comments follow funds manager Allan Gray, which is Asaleo’s second-biggest shareholder with a stake of 18.23 per cent, last week telling The Australian the Essity bid was not “particularly compelling”.

Essity is listed on the Swedish stock exchange and is Asaleo Care’s biggest shareholder with a stake of 36.6 per cent.

Two of Asaleo’s best performing products — Tena and Tork — are sold under licence from the Swedish company.

Asaleo Care, formerly known as SCA Hygiene, floated on the ASX at $1.65 per share in 2014 following a bookbuild that raised $656m in an initial public offer.

Its key brands include Tena, Sorbet, Libra, Handee Ultra and Tork. In 2018 it sold its Australian tissue business to Solaris Paper for $180m.

Asaleo’s most recent results included a 9.6 per cent lift in underlying revenue to $215m for first half and an underlying profit of $22.7m, up 80.2 per cent as the company got a boost from Covid-linked buying.

Asaleo told shareholders to take no action while it assess the proposal, which it described as at a very early stage. Asaleo also told shareholders the company “is benefitting from its recent investment in its brands” and has enjoyed increases in market share.

The company is chaired by former Ansell chief executive Harry Boon and its other directors include former Pacific Brands boss Sue Morphet and JoAnne Stephenson, who is acting chairman of Myer.