Yuanxi Zhang
Long/short equity, value, special situations

D.E. Master Blenders 1753: A Low-Risk Squeeze-Out With An 8.2% Gross Return

(Editors' Note: DEMBF trades on the OTC market with ~$280K average daily volume.)

Recommendation: Long D.E. Master Blenders (OTC:DEMBF) at USD 16.02

Target Price: EUR 12.50 (USD 17.33 at current exchange rate)

Thesis

D.E. Master Blenders is in the statutory buyout proceedings in the Netherlands to squeeze out minority shareholders at EUR 12.50. Shareholders who have read the Q&A session on the company website or talked to lawyers may think it will be a few months before the court makes a decision. According to our communication with the court, however, the squeeze-out is likely to be approved by late April. The only risk is the foreign exchange risk, which can be mitigated easily. Therefore, we recommend a...

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