InVivo tipped to make United Malt Group play

A single malt whisky. United Malt Group’s malt-processing capacity is believed set to recover to pre-Covid-19 levels by the 2023 financial year, driven by the continued recovery in on-premise beer consumption in the US and Asia and with Scotch whisky exports.

French agriculture and food-producing company InVivo is being tipped by analysts as a potential suitor of United Malt Group.

InVivo recently purchased malt company Malteries Soufflet and its parent company, Groupe Soufflet, for $US2.5bn ($3.5bn).

Analysts at investment bank Citi say that reports suggest it is aiming to double its malting capacity over the next five years, targeting acquisitions in the US, Australia and other regions.

The group is the second-largest commercial maltster behind Boortmalt.

The analysts believe United Malt Group is a logical target given its high-quality assets in those geographies.

InVivo’s malting capacity is concentrated heavily in Europe, where it generates about 90 per cent, though it has recently opened a plant in Ethiopia.

They explain in a research note that United Malt is a likely target for InVivo because of its existing capacity in the North American and Australian markets, the quality of its assets and the cheap market value relative to the earlier malt transaction at 12 times earnings before interest, tax, depreciation and amortisation (EBITDA).

Cargill Malt was sold to French company Axereal for about 12 times.

A deal could take InVivo’s malting capacity to about 3610 kilotonnes a year and make it the largest commercial maltster.

The analysts say they view United Malt Group as a high-quality reopening play, with the company’s malt-processing capacity set to recover to pre-Covid-19 levels by the 2023 financial year. This would be driven by the continued recovery in on-premise beer consumption in the US and Asia and with Scotch whisky exports.

The EBITDA will grow at about 17 per cent on average to the 2024 financial year, say analysts. This is due to the market recovery, capital spending on an expansion in Scotland and benefits from the company’s transformation program.

They believe United Malt’s value at nine times EBITDA makes it cheap given its corporate appeal.

Analysts have focused on United Malt Group after Tanarra Capital, run by high-profile investor John Wylie, recently emerged with a 5.44 per cent interest in the business.

This column has earlier reported that suitors are running an eye over the former GrainCorp spin-off.

Typically, Mr Wylie’s activity on a company register follows corporate activity of some sort, as was the case with building materials provider Boral.

United Malt’s shares closed at $4.39, following a rally from about $4.17 this month.