The best performer on the benchmark index this month has been the Bellamy's Australia Ltd (ASX: BAL) share price by some distance.
Since the start of the month the infant formula company's shares have rocketed a massive 72% higher.
Why is the Bellamy's share price up 72% this month?
Investors were scrambling to buy the company's shares earlier this month when it received a surprise takeover approach from China Mengniu Dairy Company.
The offer went down well with management, leading to the two parties entering into a scheme implementation deed under which the Chinese dairy company will acquire 100% of the issued share capital of Bellamy's via a scheme of arrangement.
China Mengniu Dairy Company tabled an offer of $13.25 cash per share, comprising $12.65 cash per share and a $0.60 per share fully franked special dividend to be paid by Bellamy's prior to the implementation of the scheme.
This valued Bellamy's equity at approximately $1.5 billion and represented an enterprise value of 30 times reported normalised FY 2019 EBITDA. This was a 59% premium to the last close price at the time of $8.32 and a 54% premium to the three-month volume weighted average price to September 13 of $8.59.
Whilst this is admittedly a significant premium, it is worth remembering that the company's normalised EBITDA fell almost 34% last year due to delays in gaining the accreditation required to sell directly in the massive China market.
So if you believe this downturn was only transitory, then perhaps you wouldn't be overly ecstatic with the offer. Especially if you bought in when its shares were trading around the $22.00 mark in 2018.
Nevertheless, management appears happy with the deal. The Bellamy's board of directors has unanimously recommended that shareholders vote in favour of the scheme, in the absence of a superior proposal and subject to the independent expert's report. Each of its directors intend to vote all the Bellamy's shares they hold in favour of the scheme, subject to those same qualifications.
Bellamy's chief executive officer, Andrew Cohen, said: "Mengniu is a preeminent dairy company in China and an ideal partner for our business. It offers a strong platform for distribution and success in China, and a foundation for growth in the organic dairy and food industry in Australia."
"This transaction can further deliver on our founder's original vision of a truly iconic Australian brand and 'A Pure Start to Life' for the world. Our employees, our trade partners and local organic manufacturers will continue to grow and thrive with the success of our business," he added.
Whilst the deal will need to be given the approval of the Foreign Investment Review Board, the company appears confident it will be signed off. In light of this, it looks like a done deal.
