Why Super Group should accept JDE's $1.30 offer

A competing offer is unlikely.

Jacobs Douwe Egberts (JDE), a Dutch coffee & tea company ultimately owned by a global consolidator of coffee concerns, JAB Holdings, has announced that it intends to offer SGD1.30 a share in cash for Super Group, if certain pre-conditions are met.

MayBank KimEng thinks that JDE, if it makes
the offer, is sincerely valuing Super at reasonable valuations of c.31x historical P/E, c.15x EV/EBITDA and 2.8x book.

The research house notes that it should have no problem advising minority shareholders to accept the offer, if it is made.

"This is especially pertinent in today's environment of weak topline growth that has weakened the bargaining power of food suppliers. Must first clear anti-trust hurdles before offer made," it said.

Here's more from MayBank KimEng:

The pre-conditions are all related to anti-trust hurdles. Specifically, China and Philippines were highlighted, but the text of the joint announcement appears to suggest that other jurisdictions are included as well.

Where that is concerned, Super and JDE combined in Singapore, Thailand and China, three countries where both companies have substantial sales, will be 25.7%, 13.8% and 12.9%, respectively.

Neither company has significant market share in Philippines and Malaysia. Given that Nestle dominates each market by far, we do not envision that JDE will encounter much anti-competition resistance.

If JDE eventually makes the offer, we doubt that there will be a competing offer. Given that major shareholders collectively holding 60% of shares outstanding have already given irrevocable undertakings to accept JDE's offer, even if there is a higher bid, the offer would already have gone unconditional. A competing bid will have no chance of succeeding, in our view.

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