NewPrinces , The new Newlat – Investment Thesis

Newlat Food / NewPrinces

Newlat is a small Italian company in terms of market capitalization but a significant player in the European agri-food sector. Founded in 2004 within the Italian Parmalat group, it has been controlled by the Mastrolia family since 2008, who leveraged Parmalat’s insolvency to take over its €36 million debt and acquire the company. Initially specializing in milk products and pasta, Newlat expanded through M&A, with the transformative acquisition of Princes Group this summer being particularly noteworthy. Newlat outbid the private equity firm Epiris in the final stages of negotiations for Princes, a key development prompting this update, as the company has undergone a substantial transformation since our September 2023 investment thesis.

The Princes acquisition has boosted Newlat’s revenues from €793 million in 2023 to an estimated €2.7 billion in 2024, doubling the share price in just a couple of months (10 after our thesis). Despite this growth, the company trades at less than 6x EV/EBITDA.

Our focus today is to analyze NewPrinces (the resulting company) in detail, examining its business lines, the short- and medium-term synergy potential identified by the company, and the opportunities for growth and operational efficiency. We map out the production facilities and segments of both companies and provide an in-depth evaluation of their integration. As always, we present our independent valuation, looking beyond the documents provided by the company. While we agree on some points, we disagree on others. This is a complex deal, and we have identified certain elements that introduce noise into the economics and forecast.

To support this analysis, we share our spreadsheet with detailed calculations and offer our perspective on the company. At MORAM, we always differentiate between Equity Research, where we deeply analyze companies and provide valuations, and Portfolio Management, which outlines the investment strategies we adopt for each company, including our criteria for including/excluding them from the portfolio (and determining their weight) based on market conditions and broader portfolio considerations.