Credit Suisse upgrades Dairy Crest, sparks M&A speculation

14th Nov 2014 12:32

Shares in Dairy Crest received a boost from Credit Suisse on Friday as the broker raised its rating for the cheese, spreads and dairy-products group and speculated about a potential takeover offer from a larger food group.The bank upgraded the stock from 'underperform' to 'neutral' and hiked its target price from 390p to 485p.Credit Suisse analysts said that Dairy Crest's move to sell its dairies division to Muller "looks very sensible" as it results in a "far more focused business on cheese and spreads". However, they cautioned about whether anti-trust authorities will "allow such a concentration in milk processing".Nevertheless, they speculated that the deal, if completed, could leave the residual Dairy Crest business open to interest from a third party.The smaller cheese and spreads operation "might attract some covetous glances by one or two in the industry", they said."Dairy Crest has had a pretty active M&A history - it has been in-and-out of yoghurt, French spreads, and now milk. This latest deal could, we believe, leave the more focused group itself vulnerable."There are active consolidators out there in both cheese and spreads (Lactalis and Kerry leap to mind)."Dairy Crest was trading 3.5% higher at 498.9p by 12:41.