Patties Foods, one of Australia’s biggest food companies known for its meat pies, desserts, frozen fruits and baked products, is still open to better deals despite having accepted a purchase bid for the firm by the investment group Pacific Equity Partners (PEP).
PEP has proposed to buy the company at a total cost of nearly AUD$230 million (US$169.65 million). Their proposed price per share is AUD$1.65 (US$1.22), plus franking credits incentive of about 10¢ per share. This brings the value per share at AUD$1.75 (US$1.29).
The board of directors at Patties Foods has recommended to its shareholders to accept the offer unless they receive a better one before voting on the decision in late August this year.
Mark Smith, chairman of Patties Foods, said, “We have, as a board, spent a considerable amount of effort and energy to negotiate this deal … and we’ve concluded it is an attractive bid and as such we want to put it to shareholders.”
Patties started as a small Victorian cake shop in 1966 by Peter and Annie Rijs. The family still owns 36.6% of the firm, and is in support of the bid. This means that if stakeholders have to vote for the deal, it would receive at least 36.6% of the votes through the family.
Nevertheless, one shareholder had previously stated that a price of AUD$1.65 (US$1.22) per share was very low. On the other hand, Dennison Hambling, chief investment officer of the investment fund First Samuel which owns slightly over 4% of Patties, said that AUD$1.65 (US$1.22) per share was the minimum price that should be considered for an offer.
Mr. Smith said that based on the proposed price, the company has received a good valuation.
PEP has acquired several other food companies including Manuka Health, V energy drinks and Peter’s Ice Cream.
David Brown, managing director of PEP, said that there were numerous growth opportunities for Patties. He pointed to the history of PEP with regards to new product development and exploration of foreign markets with its companies.
Mr. Brown, said, “We acknowledge the very important role Patties Foods plays in the local community at Bairnsdale and we look forward to supporting that ongoing relationship.” Patties share price has remained strong this year, rising by about 46% since January this year.
This is good news following its low performance in 2015 after a hepatitis A outbreak that was linked to Nanna’s frozen berries. The company had to recall most of its products leading to a staggering 88% drop in its profits. Yet based on the company’s current performance, it’s clear that there are better days ahead.
Patties Foods was listed on Australian Stock Exchange as a public company in 2006.