United Malt Group Limited operates as a commercial malt company. The Company provides malt, hops, yeast, adjuncts, and related products to craft brewers and distillers. United Malt Group serves customers worldwide.
Days Held131 days
Gross Return4%
Event TypeTakeoverUnited Malt Group, takeover, and profit in 4 months
UMG, despite a profit downgrade during the due diligence period, announced a binding deal with Malteries Soufflet which saw shareholders paid $5.00 per share. With an entry price of $4.81, the return is a very attractive 4% (or 11% annualised), an excellent return considering the high likelihood the deal was going to proceed.
Events timeline:
Current advice: Closed
Latest Update: 12th October 2023, 4:40pm
UMG held its scheme meeting today and shareholders supported the deal with Malteries Soufflet in an overwhelming majority. There are now two outstanding conditions precedent – Ukrainian competition regulator approval and Federal Court approval – but those approvals are anticipated only a few days behind the original timetable. Fortunately, Malteries Soufflet has agreed to keep the implementation date (also the date which shareholders are paid) as 15 November.
On the current timetable, the holding time will be a little more than four months. With an entry price of $4.81, the return is a very attractive 4% (or 11% annualised), an excellent return considering the high likelihood the deal was going to proceed.
Update: 12th September 2023, 11:00 am
UMG has finally commenced the distribution of scheme booklets for the upcoming scheme meeting on 12 October. With schemes, shareholders are required to vote and 75% of supporting votes are needed for the scheme to succeed, at which point all shares on issue will be sold. Therefore, members will not be ‘accepting’ for their shares, and we can be a little patient with our votes. The reason we encourage voting as late in the process is that, on occasion, if the bidding company is worried about the shareholder response, we could see a slight increase to the offer, even in the absence of a competing offer.
So, while we fully expect the offer from Malteries Soufflet to be the last offer, there is no downside in voting late. We therefore suggest members keep their scheme booklets handy, and we will provide voting guidance closer to the scheme meeting date.
Update: 24th August 2023, 11:00 am
UMG announced this morning its first timetable that investors can expect the scheme of arrangement to follow. The scheme meeting is expected to be held at the beginning of October, with payment following early the next month. The expected hold time is a little over four months which is at the earlier end of our original estimates and will ensure the annualised return is above 10%. The stock is now trading consistently above $4.90. The annualised return at these levels is not as attractive but considering we have seen many regulatory approvals since buying into the stock, a lower return is to be expected. UMG remains a hold while we wait for scheme booklets to be sent out.
Latest Recommendation: 3rd August 2023, 2:20pm
UMG has been trading in a tight range since our recommendation, with the lack of a solid timeline the likely reason behind such an attractive arbitrage at current trading levels. At the time of the release of the signed scheme implementation agreement, UMG stated that uncertainty regarding regulatory approval timelines was the reason behind the lack of clarity, and we speculated that it would be highly unlikely for our investment to exceed six months and was more likely to be closer to four months.
We therefore were pleased to see UMG announce this morning that the ACCC (Australian Competition and Consumer Commission) had given its formal approval to the deal with Malteries Soufflet. FIRB approval isn’t likely to be an issue, so we remain confident that the deal will be completed towards the earlier end of our estimated hold time. With a 4% arbitrage on offer at $4.81, the annualised return looks very good so we remain happy buyers at current levels.
Update: 3rd July 2023, 12:00pm
Despite a profit downgrade during the due diligence period, UMG has announced this morning that it has signed a binding scheme implementation agreement (SIA) with Malteries Soufflet which will see shareholders paid $5.00 per share. UMG has had a tumultuous life since its demerger from Graincorp (GNC), and with board support it is highly likely we see the deal proceed without any issues. Competing bids can’t be ruled out, but Malteries Soufflet stands to extract significant synergies and is likely to be able to justify a higher price than private equity competition.
The regulatory process is a bit of a question mark – not so much the likelihood of approvals, but rather the timeline – so UMG has not provided guidance as to when to expect the deal to complete. Looking at comparable deals and the time of year, 4-6 months seems a likely worst-case holding time. UMG has opened this morning at $4.80, implying a 4.2% return and offering a strong annualised return.
We therefore recommend members buy UMG at no higher than $4.81 (the current price offered) for a short-term, low-risk investment opportunity.
