Abu Dhabi's Almond Bid Misses Value in the Trees, Select Says

(Bloomberg) -- The 44 percent premium that Abu Dhabi’s $125 billion sovereign wealth fund offered for Australia’s No. 2 almond grower Select Harvests Ltd. fails to value the target’s plans to boost production by more than 50 percent next year, according to Chief Executive Officer Paul Thompson.

“About a third of our almond assets aren’t income-generative at the moment but largely the capital has been sunk in them,” Thompson said by phone Tuesday. “You really need to assign some value to the fact that these assets are going to be much more valuable when they grow.”

Mubadala Investment Co. offered A$431 million ($335 million) or A$5.85 a share for Select Harvest on Sept. 19, 44 percent more than the closing price a day earlier. Thomastown, Victoria-state based Select disclosed the bid on Oct. 9 when it rejected it as significantly undervaluing the company.

Select, whose shares are still down 23 percent this year even after a 25 percent jump on Monday, dropped 3.4% to A$5.09 as of 3:12 p.m. Sydney time. It isn’t in talks with any other groups about potential deals, Thompson said.

The almond market has been tough for the last couple of years and is now rebuilding, with Olam International Ltd., the second largest grower globally and biggest in Australia, noting  on its second-quarter earnings call that prices had “recovered smartly.”

Select exports about 80 percent of its output to Europe, India, China and parts of South-East Asia. Demand is being boosted by increased consumption of products such as almond milk and protein balls. Australia is the second-largest producer, behind the U.S., according to industry organization Australian Almonds.

“Clearly we are seeing a strengthening of demand and consistency in demand,” Thompson said. “Almonds have re-based themselves at a lower price and have become more attractive over other competitive nuts.”

Select has orchards in the states of Victoria, South Australia and New South Wales across more than 4,000 hectares, according to its website. Its 2018 crop could be 15.8 million metric tons based on acres planted, age profile and industry average yields, up 53% on the previous year and climbing to 21.6 million tons by 2024, the company said in a presentation as part of a capital raising this week.

To contact the reporter on this story: Rebecca Keenan in Perth at rkeenan5@bloomberg.net.

To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net, Andrew Hobbs, Atul Prakash