Bongrain, based in France, is one of the world leading dairy companies. According to figures
supplied by the International Dairy Federation (IDF), Bongrain is in the top 20 global dairy
companies with a 2014 net sales of approximately 4.4 billion Euros. The company currently
employs 19,301 people and its flagship products are specialties cheeses that are sold
worldwide. Bongrain has a strong presence in Europe, Africa, North and South America and
some Asian countries. Nevertheless, Bongrain is yet to penetrate the Australasian market. Its
strategy to do so is to buy a controlling stake in a local dairy company that allows Bongrain
quick access to the Australian dairy market. Bongrain aims to acquire a local company that has
a strong market standing as well as a solid financial position. The in-house financial analyst
team at Bongrain identified two Australian companies that can serve this purpose: Bega Cheese
(ASX code: BGA) and Warrnambool Cheese and Butter (ASX code: WCB). Nevertheless, due
to its lack of local knowledge, Bongrain has secured the service of Crescendo Partners in
assisting Bongrain with the potential buy-in.
You are working as a consultant at Crescendo Partners and you report directly to the Corporate
Finance director. You and your team have been asked by the Director to prepare a report to
Bongrain that contains the following information
1. An overview of the Australian dairy industry and the relative strength (i.e market share)
of the two companies identified above.
2. Detailed financial analyses (liquidity, profitability and capital structure) of each of the
three companies using current and historical financial reports in the last 3 years. Based
on these analysis, please provide a justified recommendation to Bongrain as to which
company would best serve Bongrain’s strategic direction.
3. Detailed calculations of the intrinsic value of the company that you recommend in Part 2 using one or more valuation techniques.
The report should follow a proper format with an executive summary followed by sub-sections
addressing the points above.
Note that the aforementioned Australian dairy companies are listed on the Australian Securities
Exchange (ASX). As a result, their financial reports are publicly available on the companies’
respective websites. Further company research can also be accomplished through databases
such as Connect4 or FinAnalysis accessible through the library website.
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