For additional information on the transaction and the company, check out our earlier post on the subject here. Many investors are still very positive on WWAV, believing that organic is the future of the grocery sector. I think there is some truth to that and WhiteWave is definitely a market leader in the space. Not everyone believes the company is a great value though.
Interestingly, the parent company Dean could present a more intriguing investment opportunity though. On the heels of the spinoff, the company was downgraded by Stifel Nicolaus and the combo sent shares plunging over 11%. Dean received several hundred million dollars in proceeds from the IPO which it will use to pay down debt and the company still retains an ~86.7% stake in WWAV. Check out WWAV’s market cap and calculate what Dean’s share is being valued at. HypeZero does the work for us and posits that Dean could be severely undervalued. Dean is also looking at selling off its Morningstar segment which could fetch up to $1-1.5b and provide even more liquidity. It’s also worth noting that not every equity research house is bearish on the name as the stock was raised to outperform at Stephens and BMO.
These types of stub trades and odd price relationships can persist though and are often the playground of hedge funds. VMW/EMC and Volkswagen/Porsche were two very popular trades of these types from a few years back. Dean is still planning on spinning off its remaining stake in WWAV to shareholders next year and this will definitely be an interesting situation to keep an eye on.
Disclosure: Author currently holds no position in any stock mentioned.