Philip O'Sullivan's Market Musings

Financial analysis from Dublin, Ireland

Market Musings 20/12/11

with 2 comments

It’s been a busy 24 hours, with M&A activity, some good macro insights and an interesting name popping up on an Irish plc’s board. Let’s run through what’s been going on.


(Disclaimer: I am a shareholder in Total Produce plc) Total Produce this morning announced that it has made a bolt-on acquisition. It will pay an initial €6m (rising to up to €15m depending on performance) for a 50% stake in Frankort & Koning Beheer Venlo, a fruit and vegetable distributor with operations in the Netherlands, Germany and Poland. This is a very sensible deal which will complement Total Produce’s existing European footprint. It also leaves the group with considerable firepower to do more acquisitions – at the half-year stage TOT’s net debt was €65.6m, or 1.1x full-year EBITDA, so the way this deal is structured leaves the group well placed to spend at least another €50-100m on growing the business.


Elsewhere, DCC announced that it has acquired the largest oil distributor in Sweden. This takes DCC’s energy business into a fifth country, after the UK, Ireland, Denmark and Austria. Goodbody’s Robert Eason makes the interesting point that DCC now distributes 7.5bn litres of oil annually! Like its fellow Irish listed distribution company Total Produce, DCC has plenty of firepower to make more acquisitions. Today’s deal will cost DCC €22.7m up front and up to an additional €6.6m in performance related deferred consideration, which given the H1 net debt position of €145.5m means that DCC’s net debt remains comfortably below 1x EBITDA.


(Disclaimer: I am a shareholder in Independent News & Media plc). I was interested to read that INM has appointed who it describes as an “experienced international investment banker” to its board. A conspiracy theorist might suggest that one thing INM may consider doing next year is sell its 30.4% stake in Australia’s APN News & Media, which is currently valued at €104m (INM’s market cap at time of writing is only €116m!) as a way of further reducing the group’s net debt (€452.1m at the half-year stage). But of course this blog is not one for idle speculation!


I note that AstraZeneca is under pressure in London today after another drug setback. It exited my portfolio earlier this year after a pharma analyst strongly recommended I let it go, so the first pint is on me the next time I meet him!


(Disclaimer: I am a shareholder in Bank of Ireland) I was unsurprised (or should that read ‘relieved’?!!) to see brokers cheer on yesterday’s BKIR statement today (given my bullish analysis yesterday).  While I think valuing the bank at this stage is a tricky exercise, given that there are so many of what Mr. Rumsfeld would call ‘known unknowns’, I think a valuation of just over 0.3x Davy’s estimated 2013 TNAV more than covers plenty of potential slip-ups along the way (barring, of course, a total meltdown of the euro).


I’ve previously touched on the unreliability of China’s official “statistics”. Bloomberg has done some number crunching that suggests China’s debts are far in excess of what the regime has previously disclosed. As CLSA’s Fraser Howie says: “You know how this story ends – badly”. 


Staying with macro topics, Trend Macrolytics’ Lorcan Roche Kelly spotted a number of great charts in the ECB’s Financial Stability report. This one, showing the length of fixed interest rates for new loans, makes for particularly interesting reading.


Written by Philip O'Sullivan

December 20, 2011 at 2:32 pm

2 Responses

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  1. […] the disposal of more assets, such as APN (I was interested to read that INM appointed an “experienced international investment banker” to its board before Christmas). While I believe that, on paper, there is better value […]

  2. […] ongoing INM saga, the company has lost yet another non-executive director, with David Reid-Scott, who only joined the board in December, standing down. INM’s board now has only four directors on it – Denis […]

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