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Special Situation: #Cefour in M&A action


ISIN Code: SE0002683920

Trading in Swedish company Cefour was halted on Monday July 29th following a strong run from SEK 0.12 to SEK 0.21 since the beginning of July. On Tuesday July 30th the company announced that it for some time has held talks with a Croatian industrial company regarding a takeover of the entire sharecapital of Cefour. The Croatian company is apparently keen to integrate Cefours packaging solution in its existing activities and sees a takeover of Cefour as an opportunity to achieve synergies and access Cefours global sales channels with their own wines to reach a global market.

According to Cefour’s management, it has been discussed that the bid must be in the region of 0,40 – 0,45 SEK per share, which corresponds to a company’s valuation of about SEK 170 – 195 million. This gives a bid premium from Mondays closing price of about 100%. The indicative bid price about 0,40 – 0,45 SEK per share is secured with the two main shareholders of Cefour, Krönlein-Andersson & Co AB and Capillum AB. The main owners are positive to the indicative level and think it is a reasonable valuation in relation to the position that Cefour is at this point. On Wednesday July 31st, announced that a continuation of the due dilligence process will take place August 13-14th at Cefour’s headquarters in Ahus, Sweden.

What is interesting is that the Cefour share is currently trading at SEK 0.31, i.e. 23 -31% below the indicative bid level.

Operationally, things are going well for Cefour, which has signed several new distribution contracts for its “Easy Wine Glass” concept, amongst others in the important US market. Many of you might have encountered the product in person if you attended a festival or concert somewhere. At the end of August, Cefour will be present at the ECRM event in San Diego, USA where selected suppliers have the chance to present their products to purchasing managers from USA and Latin America. Cefour recently announced that they have already schedule more than 40 meetings about its Easy Wine Glass for just two days. Some of the companies that Cefour will meet include Aldi, Walgreens, K-Mart etc. Elsewhere, Easy Wine Glass has been nominated for the Global Packaging Design Awards 2013 which will be awarded on October 1st by the American magazine “Beverage World”.

Given management’s statement that a bid is likely to be in the range SEK 0.40 – 0.45 will find it extremely strange that the share is trading at such a steep discount at this point. If anything, now that Cefour is “in play”, one cannot exclude that other potential buyers will step up and take a closer look at the company, i.e. a rival bid does not seem completely impossible. It is easy to see how Cefour’s product could benefit from a bigger organization with a bigger distributor network, economies of scale etc. The product as such is unique and seems to have found many fans already.

Risk-reward seems highly attractive at this point.

Nordic Investor

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