Orkla (Buy, TP: NOK105.00) - Doubling up to level down
This morning, Orkla announced it has agreed to acquire Denali Ingredients for a total consideration of NOK2.2bn. On its own, we consider the pending deal a slight negative, given relatively high acquisition multiples and what we believe is a less than ideal geographical mix. However, on the positive side, we believe the larger ice cream ingredient business could make it easier for Orkla to crystallize values. Furthermore, we note that Orkla comments that a process has now been initiated to find a long term-partner for Orkla Food Ingredients. We believe a neutral share price reaction is warranted.Orkla is a consumer goods company in the Nordic and Baltic regions. The Branded Consumer Goods area comprises five business areas: Orkla Foods, Orkla Confectionery and Snacks, Orkla Home and Personal, Orkla International and Orkla Food Ingredients. Co.'s other businesses consist of Granges, a supplier of solutions for the heat exchanger industry; Hydro Power, which produces and supplies power to the Nordic power market; and Orkla Financial Investment, which consists of Orkla Eiendom; in addition to its investments in Sapa (JV), which is engaged in extruded aluminium solutions; and Jotun AS, which is a manufacturer of paint and powder coatings.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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