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Danone and WhiteWave Foods Merger: Will It Fulfill Future Demand?

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Price movement 

WhiteWave Foods (WWAV) has a market cap of $8.3 billion. It rose by 0.94% to close at $47.43 per share on July 6, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 7.4%, 2.8%, and 21.9%, respectively, on the same day.

WWAV is trading 4.0% above its 20-day moving average, 7.3% above its 50-day moving average, and 16.5% above its 200-day moving average.

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Related ETF and peers

The Vanguard Small-Cap ETF (VB) invests 0.26% of its holdings in WhiteWave Foods. The ETF tracks the CRSP US Small Cap Index. The market-cap-weighted index includes the bottom 2%–15% of the investable universe. The YTD price movement of VB was 4.8% on July 6.

The market caps of WhiteWave Foods’ competitors are as follows:

  • Kraft Heinz (KHC): $109.4 billion
  • General Mills (GIS): $43.4 billion
  • Hain Celestial Group (HAIN): $4.9 billion

WhiteWave Foods’ merger with Danone

Danone and WhiteWave Foods have entered into a definitive merger agreement. Under the agreement, Danone will acquire WhiteWave for $56.25 per share, a premium of ~24% over WhiteWave’s 30-day average closing trading price of $45.43 in an all-cash transaction. That represents a total enterprise value of ~$12.5 billion, including debt and certain other WhiteWave liabilities.

WhiteWave said, “The transaction has been unanimously approved by the Board of Directors of both companies.” It went on to say, “The transaction is expected to close by the end of the year, subject to the approval of WhiteWave’s shareholders, regulatory approvals, and customary conditions.”

This merger will help meet future demand by providing healthy and sustainable eating and drinking options to customers. The merger will also help Danone diversify its business and increase market share in North America.

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Performance in fiscal 1Q16

WhiteWave Foods reported fiscal 1Q16 net sales of $1.0 billion, an increase of 14.1% compared to net sales of $911.1 million in fiscal 1Q15. Sales from Americas Foods & Beverages and Europe Foods & Beverages rose 14.7% and 10.8%, respectively, in fiscal 1Q16 compared to fiscal 1Q15.

Its net income and EPS (earnings per share) rose to $42.6 million and $0.24, respectively, in fiscal 1Q16. That compares to $33.3 million and $0.19, respectively, in fiscal 1Q15.

It reported adjusted EPS and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $0.27 and $134.0 million, respectively, in fiscal 1Q16. That’s an increase of 22.7% and 22.9%, respectively, compared to fiscal 1Q15.

WhiteWave Foods’ cash and cash equivalents and inventories rose by 2.1% and 2.5%, respectively, in fiscal 1Q16 compared to fiscal 4Q15. Its current ratio rose to 1.1x, and its DE (debt-to-equity) ratio fell to 2.3x in fiscal 1Q16. That compares to a current ratio and DE ratio of 1.0x and 2.5x, respectively, in fiscal 4Q15.

Projections

The company made the following projections for fiscal 2Q16:

  • net sales growth of 11.5%–12.5%
  • adjusted total operating income growth with a percentage in the high teens
  • adjusted EPS of $0.27–$0.29
  • adjusted EPS of $0.29–$0.31, excluding China’s joint venture

The company made the following projections for fiscal 2016:

  • net sales growth of 10.5%–11.5%
  • adjusted total operating income growth in the high teens to 20%
  • adjusted EPS of $1.32–$1.35
  • adjusted EPS of $1.38–$1.41, excluding China’s joint venture

In the next part of the series, we’ll take a look at Packaging Corporation of America.

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