Agro-Tech Foods Ltd (ATFL) has announced a slew of corporate actions:

1. The name is being changed from ATFL to Sundrop Brands.
2. Acquisition of Del Monte Foods at a valuation of Rs 1,300 Cr via share swap deal with issuance of 1.33 Cr fresh shares in ATFL at Rs 975 per share.
3. Leadership Changes

We are upgrading the stock back to buy, implying it can be bought/added at current market price upto intended allocation.

Del Monte Acquisition
Del Monte Foods is a Joint Venture between Bharti Enterprises (Airtel Group) and Del Monte Pacific. After the acquisition, Del Monte Foods will become a wholly-owned subsidiary of ATFL, while Bharti Enterprises will become the second largest shareholder in ATFL with 21% stake, followed by Del Monte Pacific at 14.4%. ATFL via Del Monte Foods will have an exclusive & perpetual license for the Del Monte brand in India, in addition to its manufacturing and R&D facilities in Hosur, Tamil Nadu and in Ludhiana, Punjab.

Since 2007, Del Monte Foods has built a wide product basket in India ranging from olive oil, ketchup, fruit juices, pasta, mayonnaise, to canned fruits. During FY24, its annual turnover was roughly Rs 550 Cr but it did not make any profits as operating margins were sub optimal. The deal values the business at less than 2.4x sales.

This corporate action is in line with the strategy laid out by the new promoters at the time of acquisition of ATFL. They want to focus on growth via inorganic route to make ATFL a platform to nurture synergistic businesses. While the strategy seems interesting to us, we would have to see how execution plays out over next few years. To support their vision, they are adding to leadership bandwidth as shared below.

Appointment of New Group MD
ATFL has announced appointment of Mr Nitish Bajaj as the Group Managing Director. Nitish brings over 28 years of experience in consumer products and brand management.

His previous roles include CEO of the Consumer Products Division at Piramal, Senior Vice President of Marketing at CEAT Tyres, and leadership roles with Reckitt Benckiser, Ranbaxy Global Consumer Healthcare, and Heinz India.

Asheesh Kumar Sharma, who is the current Managing Director & CEO, will transition to the role of Executive Director & CEO for the two existing business lines i.e. Sundrop & ACT II brands.