Chart Two
This chart shows the weekly Madrid stock exchange price of dominant olive oil bottler, Grupo SOS, since its initial public offering in May of 2005. The very long bar on the right hand side of the image represents the 56.9% of its value that it has lost this week (not to mention the 80% since July).
The cause of this disaster was the release of 2008 results which, in the minds of investors, call into doubt the ability of the company to service its 900 million euros of debt - much of which was assumed in order to purchase at a very high price the Bertolli brand from Unilever and permitting it to put a stranglehold on olive oil pricing. What we can almost certainly expect to see next, instead of government aid going to ruined growers, is the Junta de Andalucía coming to the financial rescue of its favourite son. One doubts they can afford to do both under the current circumstances.
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Categories:
SOS
7 comments:
900 Billion euro debt ??!!!
Umm, yeah. Thanks for pointing that out.
Regarding Bertolli debt, it is interesting to read the press release dateline 30 Jan 2009 stating:
Just 30 days after acquiring Bertolli, Grupo SOS has succeeded in redeeming 57% of the debt incurred in acquiring the Italian olive-oil bottler. It thereby fulfils the commitments made to lenders in December well ahead of schedule.
The loan of 994 million euros granted to Grupo SOS included 600 million euros of fresh money to finance the purchase of Bertolli, plus 394 million corresponding to restructuring the existing debt.
Of the 600 million of new debt, Grupo SOS has succeeded in redeeming 340 million in just 30 days. 150 million euros corresponds to the capital increase subscribed by Caja Madrid and 190 million to the sale of the Group’s biscuit division Cuétara.
As a result Grupo SOS has managed to redeem 100% of Tranche A of the syndicated loan, scheduled to be paid back in July 2009, and 20% of Tranche B: 200 million euros to be paid back in 36 months.
Thus Grupo SOS has met the commitments it made to the 35 banks participating in the syndicated loan well ahead of schedule, true to its promise to cut back its debt overhang in the shortest possible time frame.
The transaction, due to be finalised on Monday 2 February, is doubly significant given the present difficult economic context.
Thanks for your note, but that's all putting lipstick on a pig.
If they had sold Cuétara and floated stock, without buying Bertolli, they still would not be a debt-free company - the only thing you want to be in a deflationary recession. In fact, its debt-equity ratio is far higher than its industry average.
The high price paid for Bertolli was, in part, on the assumption that the non-Mediterranean market constituted a growth opportunity. That idea can be discounted for the time being.
SOS has recently announced that they will be trying to sell 20 or 25% of their Italian business. Aside from an admission that the plan doesn't work, they will get nowhere near the equivalent of the 600 mn paid for Bertolli. The result is that an immediate cash problem is solved, but at the cost of making Bertolli even more expensive a purchase. Worse still, the smell of blood will do nothing but attract vultures.
The fact that the company's stock has fallen without resistance from nearly 12 euros in January to 3.45 now should tell us that no money is available for operations to support its valuation.
Cheers
No question SOS share has fallen - I notice today it is about 4.50 - and debt level may be high, but looking at IBEX-35 Index, they have not done too bad over the period.
I mean that Index was nearly 16 only 16 months ago, now today it is 7.50.
All businesses are suffering - not just SOS.
Can you give some more insight into the Italian sale of 20% or 25%.
You don't think those were real investors keeping SOS at 12-13 euros no matter what markets did. Do you? The appeal must have been the PE of 57.
I can't find where I read about the sale, but this gives a small idea..
http://pe.invertia.com/noticias/noticia.aspx?idNoticia=200903051151_RTI_1236253884nL5324494&idtel=
Although the company blames short sellers for the rout, it's pretty evident that if they're selling part of what they were originally going to consolidate and bring to the stock market - the Italian business - that things are not working out as planned. The market knows this.
I read that Peruvian report but I did not get any more idea. Am sure you will report developments later though.
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