There is definitely scope for a competing bid in my opinion, largely because it’s clearly still undervalued. That doesn’t mean Private Equity, or a big conglomerate steps up to take on Hello Fresh though. It only makes sense lobbing a competing bid if you think you can win it and outbid Hello Fresh at a reasonable price. HFG have plenty of capital as they are spewing out cash at the moment and will continue to do so. HFG paid USD 277 million + up to $100 million in an earn-out and management incentives for Factor 75 in the USA. YFZ is probably a better business, but in a smaller market.
For me, YFZ is actually more valuable to a PE business, or a Wesfarmers, as there is no way could they build the equivalent business for $200m, whereas Hello Fresh could given their existing business, distribution network, etc. If I had the capital, I would be lobbing a bid at $175m, then making an offer to Hello Fresh to make them YFZ biggest customer through the provision of Hello Fresh branded ready made meals, drinks and snacks, essentially giving them access to the YFZ product set without the acquisition cost, while driving revenue growth (and overseas expansion opps with HFG) for YFZ. Let’s see in any of the investment bankers get creative with this one.
YFZ Price at posting:
91.5¢ Sentiment: Buy Disclosure: Held
