Patties Foods share price to soar on takeover offer

Patties Foods Limited (ASX:PFL) receives proposal from private equity firm

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Patties Foods Limited (ASX: PFL) is likely to see its share price soar when trading in the share begins at 11am today, after the pies and sausage roll manufacturer received a preliminary takeover offer from private equity firm, Pacific Equity Partners (PEP).

The offer includes $1.65 of cash per Patties share, including any dividends paid after the proposal date. Patties share price closed at $1.33 on Friday.

In response to media speculation, Patties says it has received a non-binding, conditional and incomplete proposal, but advises shareholders not to take any action yet. The company says that it will engage further with PEP "in the best interests of shareholders", but also includes the standard disclaimer that there is "no assurance that the proposal will result in any formal offer being made".

The offer comes after the share price has risen more than 20 cents over the past six weeks or so.

Patties Foods has seen its share price struggle over the past five years as competition in supermarkets run by Woolworths Limited (ASX: WOW) and Coles – owned by Wesfarmers Ltd (ASX: WES) has increased dramatically and budget private label brands compete with the likes of Patties' brands, including Four'n Twenty, Herbert Adams and Nanna's. Patties has been forced to cut its margins – much like other suppliers to the large supermarkets.

The company also reported an 87% crash in net profit in 2015, after a much-publicised Hepatitis A scare. Patties was forced to recall frozen berries earlier last year after Hepatitis A was found in four adults in Victoria and New South Wales. Excluding the scare and Patties exit of the Frozen Fruit business, the most recent half-year result was much more promising – but perhaps wasn't factored into the share price.

Motley Fool writer/analyst Mike King owns shares in Woolworths and Wesfarmers. You can follow Mike on Twitter @TMFKinga The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »