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Why Other Bids For WhiteWave Foods Are Unlikely

Why Other Bids For WhiteWave Foods Are Unlikely - Whitewave Foods NYSE:WWAV, Pepsico, Inc. NYSE:PEP

Jefferies’ Akshay Jagdale believes that chances of WhiteWave Foods Co WWAV 0.41% receiving a higher, alternative bid are “fairly remote.” Jagdale downgraded the rating on the company from Buy to Hold, with a price target of $56.

Competing Bids Unlikely

The analyst mentioned that an alternative, higher bid was unlikely for WhiteWave Foods, given its full or rich valuation, the meaningful synergies outlines by Danone that are unlikely to be topped by another bidder, reports that PepsiCo, Inc. PEP 1.03% had been interested but had not bid due to the valuation being full, and anti-trust risks.

“Danone expects synergies to reach $300M by 2020, which if achieved would represent ~8 percent of WWAV’s 2015 sales which is at the high end of ~4-8 percent range we observe for a typical food deal,” Jagdale pointed out.

Of the $300 million in synergies, $75 million is expected to come from revenue synergies.

Why Other Bids Are Unlikely

Jagdale also noted that companies don't usually promise or quantify revenue synergies, “let alone this early and of this magnitude.”

The analyst believes it would be unlikely for any other potential suitor to be able to realize synergies of a similar level, especially revenue synergies.

In addition, according to the Jefferies report, not only does WhiteWave Foods have one of the richest valuations in the food space, the size of the transaction is also fairly large.

This was further supported by recent reports that Pepsico didn't translate its interest in WhiteWave into a bid on the basis of price.

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DateFirmActionFromTo
Jul 2016JefferiesDowngradesBuyHold
Jul 2016Credit SuisseDowngradesOutperformNeutral
Jul 2016Tigress FinancialDowngradesBuyNeutral

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