Whitewave

I hate milk.  I’m lactose intolerant so I actually have a good reason to hate milk.  Dean foods is a milk company, I think they sell mainly to schools.  But about a year ago they decided they hated milk too and spun off Whitewave.  Whitewave is the non-milk portion of their business, though own Silk, and other milk alternatives.  I drink a tremendous amount of almond milk.  It is delicious.

So what does this have to do with stocks?  A friend of mine pitched Whitewave as one of the few categories in the grocery store still experiencing double digit growth.  And now that’s it’s not part of Dean Foods, some large multinationals might be interested in picking up a growth brand in a non-growth industry.  That was enough for me.  I bought some yesterday. 

WWAV has a $5 billion market cap, so this is a move the needle company for a big boy.  And the fact that it’s P/E is a little pricey doesn’t bother me at all.  A big boy will take out a lot of costs, and they streamline distribution and production.  So while I’m doing my research I’m making sure I own a little, because I like companies that might get bought.

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4 thoughts on “Whitewave

  1. But why is it a good buy? Is it undervalued? Why would a PE firm buy it more than any other company with similar market cap?

    • Not a financial buyer but a strategic buyer. Someone like Nestle, or Mondelez (Kraft spin off). There’s a little less than 700 million in annual SG&A, could a strategic take out 200 million? 300 million? that’s 3x or 4x earnings. Hard for those 100 billion $ companies to buy growth, not many attractive categories in the grocery store.

  2. Love the Silk brand, and you can’t go wrong with a Colorado-based company 😉 I agree this company is well positioned to continue growth in the healthy foods space and could be a desirable acquisition target. It’s a high-ish P/E, but there are a lot of outs to create value and at the end of the day, people have proven they are willing to pay a premium for organic healthy options, treating them more as a staple than a discretionary purchase. (At least that’s how my wife views it, who drives our family’s food purchasing behavior).
    -Maverick.

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