Early indications have emerged that poultry producer Inghams could be a takeover target, with international food producers such as US-based Tyson Foods said to have been making inquiries around the market about buying the company.
It is understood that at least one other operator has also been asking questions about Inghams in the past 12 months, with interested groups thought to be Charoen Pokphand and Cargill in addition to Tyson.
DataRoom understands that the inquiries were made to industry experts in the past year at a time when poultry remains in strong demand due to its affordable price.
On Tuesday, the company missed its guidance for results and its shares crashed by 17 per cent, after they had closed at $4.04 in the previous session.
In the past 12 months, suitors have shied away from making a pursuit of Inghams in the belief that it was not a good deal when the shares were trading at $4 or more.
Yesterday, an Inghams spokesman said the company had not received any takeover approaches in the past year.
Its shares closed yesterday at $3.20.
Market observers say the company looks interesting at $3.20 at a time when the poultry company posted a weak result this month, despite poultry demand remaining strong.
It is not out of the question that the company could be acquired.
New Zealand rival Tegel Foods was purchased last year by Philippines-based Bounty Foods for $NZ437.8 million after it underperformed following its 2016 initial public offering, listing as a business worth $NZ522m.
Private equity firm TPG had a 47 per cent escrowed interest in Inghams when it was listed in 2016 as a business worth $1.2 billion.
Now the company’s market value is $1.19bn.
TPG retains a stake in the business of about 20 per cent and the thinking among some is that any suitor eager to acquire the business would probably attempt to buy the shares from the private equity firm to put its foot on the company at a time when TPG is likely to be eager to cash out.
Analysts say that investors have sold off Inghams this week on the back of concerns that the management did not have a clear plan on how to turn around the business and investors were eager to secure answers as to how performance would improve in the future.
TPG has been progressively selling down its stake, offloading part of its cornerstone interest in March last year, with Citi working on the trade at the time.
When Inghams headed to the boards in 2016, a long line of investment banks were on the ticket, including Macquarie Capital, UBS, Credit Suisse, Morgan Stanley, Citi and Goldman Sachs.
An acquisition is less likely to appeal to a private equity firm compared to an industry player because TPG offloaded all of the company’s property interests when it was under its control.
Tyson Foods is an Arkansas-based multinational that counts itself as the world’s second-largest processor and marketer of chicken, beef and pork behind JBS, while US-based Cargill is the largest poultry producer in Thailand.
Charoen Pokphand is Thailand’s largest private company and one of the top three poultry producers in the world.
Inghams this week said its earnings had been hit because of higher-than-expected costs due to an unexpected increase in customer demand and as the drought had pushed up the cost of feed.
It also expected earnings to be lower for 2020 as it posted a 10.1 per cent increase in net profit to $126.2m.
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