Aspen with another baby formula deal

Aspen have announced yet another deal yesterday afternoon, in the baby formula market again. Or infant nutrition (IN) as it is called. Cast your mind back to Aspen acquires more baby formula in April of this year. The concluding lines were "... this acquisition is roughly the same size (as the consumer division). And working backwards from that EBITA margins for the Rest of Africa business, I can presume that they paid a cheaper price than Nestle paid Pfizer." Read that piece and then come back here, but hurry!


Good, you're back. These are now additional agreements that have been reached with Nestle. For what? Well, this is exciting, to have the exclusive rights to use the S26 and SMA IN products in the countries agreed on (Mexico, Venezuela, Colombia, Ecuador, Chile, Peru, Central America and the Caribbean) for a period of 10 years. Now for those of you familiar with the product good luck with your long nights and bottle sterilizing, there are the three stages, infant (cry, eat, sleep), toddler (scream and shout, really dirty) and early childhood (lost their chubby cuteness). During that time, the ten year, Aspen will co-brand alongside the S26 and SMA products. There will then be a ten year exclusivity in which Aspen will have a "black out" period where Nestle will not be able to commercialise their licensed products in these territories.


But more importantly for me is that Aspen will buy the existing infant nutritional production facility in a place called Vallejo in Mexico. Close enough to the West Coast of Mexico, Northwest of Mexico City. So a proper production facility here, close enough to North America. But this will supply their expansion plans across these territories no doubt. There is no price given, only an annual turnover number of 187 million Dollars (1.85 billion Rand at current exchange rates) for the territories. Again, they are effectively doubling their consumer division again, from having doubled it back in April with those announcements.


"Overpriced stock" of a company at face value neglects to tell the whole story. The Aspen share price almost always feels like it's overvalued. I remember at 40 Rands, then 80, then 150 and now exactly the same. You are paying up for the quality of the management and their vision to create one of the best and biggest emerging market pharma companies. So far they are doing an excellent job!