Credit Suisse says: "Mispriced Asset Poised For Re-Valuation
Following Split-Up & Div Introduction; UPGRADING to OUTPERFORM
(from Neutral); Raising TP to $21 (from $18)."
"After meeting with the management of Dean Foods and WhiteWave
over the past week, we believe that the market is under-valuing the
stub of Dean Foods leading up to the distribution of WhiteWave
shares. We are upgrading Dean Foods to Outperform (from Neutral)
and raising our 12-month target price to $21/share (from $18) to
reflect a 5.5x EV/EBITDA multiple for the Dean stub and a
conservative value of $17/share for WhiteWave. While we think the
near-term upside to the shares is compelling, we still harbor
concerns longer term about Dean given the persistent overcapacity
in the dairy processing industry, declining per capita volume
trends, and what appears to be declining negotiating power with
certain retail customers.
"Distribution of WhiteWave shares will remove an overhang on
Dean's stock. We view the choppy trading pattern in the stock as
temporary. Investor sentiment on stand-alone Dean is growing more
positive, but Dean's 87% ownership of WhiteWave makes it difficult
to build a new position until Dean distributes the shares. The
other complicating factor is that the split with WhiteWave will
result in Dean's exit from the S&P 500 and index funds own a
little more than 20% of Dean's shares. These issues may linger for
a short time after Dean executes the distribution of WhiteWave
shares in late May. But we think investors should act now while the
underlying asset is mispriced rather than waiting for an even
cheaper entry point."
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