Good afternoon, Robert. The reason for the two threads is due to the fact the other thread spelt Sleeman as SleemEn. The version on this thread is the correct one.
With respect to the deal, it was obvious Sleeman would have to do something to fill production capacity at their new facility. The question is, what to do? The options were increase sales or purchase a competitor and consolidate. The first option was impossible because current production represents only 50% of their current production capacity and no company doubles sales overnight. Therefore, option #2 was the only feasible one.
(Of course, there was always option #3 - keep things as they are and grow into them later but this too is impractical as the market views inefficiency as a big negative)
Thus, is this a good move? We think so. ALE has just eliminated a competitor, increased their production capacity and will benefit from the synergies of operations. For example, in their joint press release, it states that 25 of the 50 UCB employess would be moved to the Sleeman operation. We doubt if more than 10 are actually moved because they're just not needed. Moreover, if we remember correctly, UCB is unionized, whereas ALE is not. Not a mix that ALE would want. If anyone comes over, it will be the sales people from UCB that have a direct connection to current UCB and now ALE customers. No need for Admin or production people.
Having said that, we don't view this deal as a "blockbuster" deal but it makes sense and will lead to continued growth. Why does the other thread not like the deal? We believe it is because many were expecting ALE to be purchased by Molson's or another large brewery. Now that the expected winfall from such a buyout has not come, some investors will bail and look for the next home-run. True, UCB may have had some problems but that is what made them such an easy target to purchase in the first place! Under Sleeman, the UCB label can expect to benefit from better management, better name recognition and everything else associated with a better company. We would expect UCB sales to show vast improvement over the next 4-6 quarters.
Regards,
Agora. |
