Glanbia could be forced to make painful concessions to its business structure if an activist investor pushes for changes at the group.
News agency Bloomberg reported yesterday that Frankfurt-based activist investor Clearway Capital, an investment firm established in 2020 by Gianluca Ferrari, has taken a stake in the Irish company.
It is likely the stake is under the 3pc threshold where investors have to publicly reveal a holding to the stock market.
Shares in Glanbia jumped more than 6pc at one stage yesterday, but they are trading down as much as 15pc compared to the start of the year, versus a significantly better performance by peers.
Activist investors typically take stakes in listed companies where they believe there is a disconnect between the share price or performance of a company and its true underlying value.
They often push for changes – sometimes significant ones such as asset sales and spin-offs – in an effort to realise more value from the business.
It’s possible that Clearway sees an opportunity in tackling the overarching group structure at Glanbia and could be attracted by the low valuation of the company compared to peers.
It might also see potential for an increased focus on Glanbia brands that could be sometimes overshadowed by its significant nutrition performance business.
James Targett, an equity analyst at Berenberg, pointed out that the broker has a ‘buy’ rating on Glanbia shares, which he said do not reflect the value of the business.
“We think it’s an undervalued company,” he told the Irish Independent.
“It trades at a multiple which few companies rarely trade at unless people think there’s massive amounts of earnings risk or there’s some sort of structural problem with the company, neither of which we think applies to Glanbia.”
“Glanbia operates in categories that have good growth – sports nutrition, food ingredients – but for various reasons, perhaps they haven’t managed to capture that growth,” he added.
Earlier this month, Glanbia completed the €307m sale of its stake in Glanbia Ireland - which owns brands such as Avonmore and Kilmeaden - to Glanbia Co-Op.
That will also see the Co-Op’s stake in the listed company fall from the current 31.5pc as it distributes 12 million shares to its members.
Glanbia, whose CEO is Siobhan Talbot, generated revenue of €4.2bn last year and earnings before interest, tax and amortisation of €271m.