Rights issue fully subscribed, SEK 601m in net proceeds

EPS -25-30% on dilution/reduced gearing for ‘19e-‘21e

10.6-9.4x EV/EBITDA and 15.1-13.1x P/E for ‘20e-‘21e

Rights issue fully subscribed, est. net proceeds of SEK 601m
On November 25 Midsona announced that the rights issue to finance its acquisition of Alimentation Santé was fully subscribed, meaning proceeds of around SEK 613m before issue-related costs of SEK 12m (our estimate). Through the rights issue, Midsona's share capital and number of shares increase by SEK 93m and 18.6 million (18.4m B-shares and 0.2m A-shares) respectively. After the rights issue, the number of shares in Midsona will amount to 64.2m B-shares and 0.8m A-shares, i.e. 65.0m shares in total (+40%). The final day for trading in paid subscribed shares (BTA) will be 2 December ‘19. The new shares are expected to start trading on Nasdaq Stockholm from 6 December ‘19.

Implies 25-30% lower EPS and ND/EBITDA 4.8-2.4x, ‘19e-‘21e
We update our estimates in line with the new capital structure and pencil in SEK 601m in net proceeds from the rights issue, taking account of SEK 12m in issue-related costs. The rights issue and the consequent new capital structure imply that Midsona’s EPS is lowered by 25-30% for ‘19e-‘21e. It also takes Midsona’s lease adj. net debt/EBITDA to 4.8-2.4x (7.1-3.8x) for ‘19e-‘21e, well in line with its gearing target of 3-4x (which should be viewed as a one-year, forward-looking target according to management).

Attractive product portfolio and credible goals/strategy
We continue to like Midsona’s product portfolio of strong brands within healthy, plant-based and organic foods. We like the business case for growth in Europe and think the company has the capability to deliver on its new financial targets (>15% annual sales growth and a long-term EBITDA margin of >12%). We expect healthy earnings growth in the coming quarters due to price hikes, M&A/synergies and cost savings. On our updated forecasts, Midsona trades at 10.6-9.4x
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