Swedish giant Essity’s bid for Asaleo Care labelled ‘uncompelling’

Swedish consumer goods giant Essity has made a grab for control of Australian-listed Asaleo Care.

Simon Mawhinney, managing director at Allan Gray, Asaleo Care’s second-biggest shareholder, said of the bid: ‘If you look at the asset price inflation that has taken place around the world I wouldn’t have thought this is particularly compelling, no.’

Swedish consumer goods giant Essity, the world’s second-biggest producer of tissues, has made a grab for control of Australian-listed Asaleo Care, whose key brands are already owned by Essity and produced in Australia and New Zealand under licence.

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 biggest money spinners, Tena and Tork, are owned by the Swedish company.

However, the bid appears stranded after Asaleo Care’s second biggest shareholder, Allan Gray, labelled the offer as uncompelling with a price that was not a “knockout blow”.

On Thursday Essity announced it had pitched a non-binding indicative proposal at $1.26 per share.

It is understood the Swedish group wants to lift its stake to 50 per cent, in keeping with the typical capital ownership structure Essity has in other countries.

The bid compares with the previous closing price of $1.01 for Asaleo Care on Wednesday.

Asaleo Care went into a trading halt on Thursday as rumours spread of a bid. Its shares quickly rose to $1.245 and were at $1.23, up 22c, when the halt was declared.

The bid values Asaleo Care at almost $670m. Essity has a market capitalisation of $185 billion krona ($29.21bn) and its portfolio of personal hygiene and cleaning products are sold in 150 countries. Essity is not commenting any further on the bid.

“There can be no certainty that any agreement will be reached, that a formal binding proposal will be submitted, or that a transaction will be undertaken. The proposal is not subject to financing conditions,” Essity told the Swedish stockmarket.

“Essity will finance its acquisition of shares through its own funds.”

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.

LAsaleo Care’s Libra feminine hygiene products are manufactured in Victoria.

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

Asaleo Care is yet to make a full statement but told the ASX it had been in the receipt of an “unsolicited, indicative, conditional and non-binding proposal for a potential transaction”.

Funds manager Allan Gray is Asaleo Care’s second-biggest shareholder with a stake of 18.23 per cent, and its managing director and chief investment officer Simon Mawhinney told The Australian on Thursday the bid from Essity was not compelling.

“If you look at the asset price inflation that has taken place around the world I wouldn’t have thought this is particularly compelling, no,” Mr Mawhinney told The Australian.

“I am free to sit on my hands and do nothing.”

In a recent investor forum where Asaleo Care chief executive Sid Takla was interviewed, Mr Mawhinney signalled that at around $1 per share Asaleo Care was trading at fair value. The transcript of that interview was being distributed on Thursday.

However, Mr Mawhinney dismissed comments from the Essity camp that this meant its takeover offer of $1.26 per share was a superb deal.

“That is just another way of saying we think it is cheap, that’s just rubbish. That is a complete misrepresentation of our view. It is very cheeky on the part of those distributing that,” he said.

For the first half of 2020, Asaleo Care posted a 9.6 per cent lift in underlying revenue to $215m and an underlying profit of $22.7m, up 80.2 per cent.