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Robert Wiseman agrees multi-million Müller takeover deal: analysts react

By Ben Bouckley , 13-Jan-2012
Last updated on 16-Jan-2012 at 16:55 GMT

Robert Wiseman: A Müller takeover makes 'strong commercial sense' for the executive chairman
Robert Wiseman: A Müller takeover makes 'strong commercial sense' for the executive chairman

Robert Wiseman Dairies says it has agreed the terms of a £279.5m takeover deal by Müller UK (a wholly owned subsidiary of the German dairy giant) and is recommending the offer unanimously to shareholders.

Last Friday, Wiseman, based in East Kilbride, Scotland, announced it was in talks with Müller following a sharp spike in its share price (332.5p) as we went to press that day, up from 244p at Thursday’s close, now 388.79p).

Welcoming news of a concrete offer this morning, executive chairman Robert Wiseman (pictured) said: "The combination of Müller and Wiseman makes strong commercial and strategic sense, creating a leading integrated dairy business in the UK with complementary positions in the yoghurt and potted desserts market and the fresh milk market."

He added:“Müller's [390p/share] offer represents an attractive price for an outstanding business and Müller recognises the importance of Wiseman's management (who will continue to lead the business alongside Müller), employees and our best-in-class assets.

“These factors have contributed to the Board's recommendation of this transaction. I very much look forward to playing a part in the next chapter of Wiseman's development,” Wiseman said.

Heiner Kamps, CEO, Müller said: "This is an exciting strategic move by Müller to enter a new market segment in the UK. The combination of these complementary businesses will form a leading dairy player offering a range of exceptional products to our customers across the UK. This will create significant opportunities which will benefit suppliers, customers, consumers and employees."

Analysts hail 'class act'

In a note this morning, Shore Capital analysts Clive Black and Darren Shirley noted that Muller held the number two and three market positions in UK yogurts (Muller Corner, Muller Light trail only Danone brand Activia).

"Whilst deals are never done done until they're done, with well over 50% acceptances [54.5% reported] we believe Muller is in a very good place to gain control," they wrote.

Black and Shirley said they thought Wiseman shareholders would welcome a cash offer given the firm's under-performance over the last year, mainly due to intense supermarket price competition since summer 2010, input price pressure for milk and rising packaging and distribution costs due to high oil prices.

The analysts said they believed that Wiseman was the UK's leading liquid milk suppplier, a "very well-invested and operated business", with, they added, the strongest network of well-invested dairies in England and leading overall service levels in the industry.

As for what Muller saw in Wiseman, Black and Shirley said, it was a matter for the German firm's directors. "Albeit we foresee the greatest potential benefits...in milk procurement, collection and utilisation, plus the saving of the annual circa. £12.5m [€15.1m] cash dividend payout."

Stickier UK wicket for Müller?

Commenting on news of the talks last week, Julian Wild, a corporate finance partner at UK law firm Rollits, told DairyReporter.com that he was surprised, especially after he scotched talks of an approach by Müller for Dairy Crest last year along similar lines.

Wild said: "My view is that I think Müller hit a stickier patch in the UK, and I don't think their performance in the UK has been quite as strong, and they've certainly had some changes of management. So it's certainly understandable that they're looking at other ways to grow their business.

He added: "I'm not surprised on the one hand that Müller might be looking at different ways to diversify their business within dairy. But I have to say that I'm tremendously surprised that they'd want to enter the liquid milk market, which is hugely competitive.

"There are only really the three major players, in Dairy Crest, Arla and Wiseman, and they are all having to invest in new dairies, they're all taking business from each other. It's just massively price competitive, and quite why Müller thinks that's an attractive market to be in, I have to say I struggle to see at the moment.

However, Wild said he wasn't totally surprised that the management at Wiseman (the Wiseman family) might be keen to exit, because"they're at the stage when they may be looking at succession".

Leverage brand recognition?

But with companies such as Arla and Wiseman diversifying into lactose free and other higher-margin products, did Wild think that Müller perhaps saw scope to develop new offerings for consumers and leverage on the brand recognition provided by a major UK dairy processor?

Wild said: "I wouldn't say that the Wiseman name or any of the other UK milk producers would be well-known to the consumers, because the market is almost entirely private label. Ask the average consumer who produces milk for major retailers, and I don't think they'd have a clue. So I don't think there's a great deal in the brands at all, because it is a private label market.

He added: "There are some quite interesting innovations coming through, like the one you just mentioned. Clearly there are people with lactose intolerance, and doubtless there is a market along free-from lines. But it's not that big compared to the vast bulk of the liquid milk market."

"I just do not see that that is going to change. Milk has always been used as a loss leader by the major retailers, and they will remain very, very competitive, because that's probably the one product that consumers know how much it costs."

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