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Parmalat: Seeing Upside Investment Potential

Apr. 24, 2011 3:53 AM ETParmalat S.p.A. (PLATF) Stock
Gisli Eyland profile picture
Gisli Eyland


Parmalat (OTC:PLATF) is a multinational food group with origins in Italy, present in all five continents through either a direct presence or through license agreements in the products areas of milk, vegetable, fresh (yogurt, cheese, desserts) with global brands such as Parmalat and Santal, as well as other strong international and local brands.

My interest in Parmalat initially started as I read Third Avenue International Value Fund's most recent letters to shareholders (see here). There are several factors that make Parmalat a special situation potential:

  • In 2003 the company collapsed with a 14bn euro hole in its accounts in what remains Europe's biggest bankruptcy (see here).
  • Since its collapse, the stock is not widely held by Italian institutional investors, presumably because of the stigma of the earlier bankruptcy (see here).
  • Since 2003, the company has built up a chest of financial assets worth €1,4 bn, through settlements of lawsuits against investment banks due to the fraudulent behavior uncovered that lead to the bankruptcy.
  • In March 2011, Lactalis, a privately held French dairy company, announced it had taken control of 29 per cent of Parmalat, making it the largest shareholder after it struck a deal to buy out a trio of foreign activist funds who had been agitating for change at the group (source: FT.com).
  • The Italian government, lead by finance minister Guilio Tremonti, is trying to preserve Parmalat´s Italian controlling ownership. Allegedly this is being closely monitored by the EU (see here).
  • Other companies have been mentioned as takeover candidates, such as Pepsi Co, Danone, Intensa Sanpaolo and Ferrero.

Fundamental analysis of Parmalat group´s 2010 results


The reformulated balance sheet shows the accumulation of financial assets and the reformulated income statement shows how these assets generate next to no returns. The other operating income in 2010 mostly

This article was written by

Gisli Eyland profile picture
Fundamental Finance aficionado. Special interest in marketplace companies, exchanges and other "croupiers".Focus on software and travel industry.

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