On 22 April 2009, Koninklijke Wessanen NV announced its plans to look into exiting its US distribution and branded businesses. (constituting 60% of group sales and 40% of its EBIT).  On 10 June 2009, Wessanen communicated it was in an 'orientation' phase to determine the sale price of its US businesses. On 15 June 2009, Wessanen announced on 15 June 2009 that it discovered accounting irregularities in its US branded business.

Wessanen fell 25% of 67c to EUR 2.6 after its accounting irregularity announcement and is currently trading at a 20-30% discount to both US food distributors and European/US food manufacturers. We see significant upside if Wessanen were to dispose its US activities to the likes of United Natural Foods, Nash Finch or a PE house, who all have displayed acquisitive interest in this cash generative, consolidating food(service) landscape. After such a disposal to take place in 2H09, we believe Wessanen could become a pure play European branded natural/organic foods high margin company, which could be interesting for the likes of Unilever or other food groups, wanting to gain further exposure to the growing organic/natural foods market.

Investment Valuation
We believe getting in under EUR 2.5 a share is an attractive risk-return proposal, given the downside trading SOTP valuation of EUR 2.4 (obtained by applying a 0 valuation for the US branded business where the accounting irregularities were found AND applying a 20-25% peer discount valuations for its other European/US food distribution and branded production businesses) and an upside US distribution sale  scenario valuation of  EUR 3.5 a share (obtained by sale price of US distribution in line with lowest exit multiple of food distribution deals and a 0 valuation for the US branded business).

Find here a full Panta Capital Analysis on Wessanen.