- Devro agrees to £540 million takeover
- Takeout price represents tasty premium
- Sausage skin maker to exit stock market after almost 30 years
Shares in Devro (DVO) spared 60% to 307p after the sausage skin maker agreed a juicy £540 million takeover by Saria, a leading player in the agriculture, food and biofuels sectors owned by one of Germany’s richest families.
Pitched at 316.1p a share in cash, a generous 65% premium to yesterday’s (24 November) 192p closing price, and a 92% premium to the price before Saria signalled its interest to the board, the takeover will see Moodiesburn-based Devro de-list after almost 30 years on the stock market.
WILL SARIA INVEST IN DEVRO?
The takeout price values Devro, which makes collagen products for the global food industry, at £540 million and implies an enterprise value of £667 million.
Part of the Rethmann family empire, Saria has a strong track record of making acquisitions and plans to invest in and grow Devro, whose sausage casings business is highly complementary to Saria’s Van Hessen unit.
Van Hessen supplies natural sausage casings, meat products and pharmaceutical products which are harvested in combination with the natural casings and already distributes Devro products in Brazil.
Saria intends to maintain and invest in Devro’s seven manufacturing sites as well as invest in its headquarters in Moodiesburn, Scotland.
IS IT A GOOD DEAL FOR SHAREHOLDERS?
Devro’s chairman Steve Good said Saria’s offer reflects ‘the strength of Devro, our medium-term prospects, and recognises the substantial improvements made to the company through the successful implementation of our growth strategy’.
Good added that the offer also provides an opportunity for shareholders to ‘crystallise, in cash, the value of their investments at a fair and reasonable value’.
Under Saria’s ownership, he believes the combined business ‘will have an enhanced product offering; will be a stronger more diversified group of scale; and will look to further accelerate long-term sustainable growth.’
Devro has been plagued by profit warnings over the years, but the company has had a habit of bouncing back. While its results for the half year to June 2022 showed profits slipping, the company was confident about the full year.
Accompanying the takeover news was a positive update for the four months to 31 October 2022. Devro said sales fattened up 16% year-on-year thanks to price increases and good volume growth in mature markets, while operating margins were ‘well ahead’ of those generated in the first half.
‘Current trading and the full year outlook are slightly ahead of the board’s expectations,’ insisted Devro, ‘underpinned by a robust performance and foreign exchange tailwinds. We look forward to 2023 with confidence, whilst remaining alert to global supply chain challenges and ongoing inflation pressures.’
