Magnum Ice Cream bid seen unlikely as complicated by tax constraints

(Alliance News) - Shares in Magnum Ice Cream Co NV soared on Friday after a report suggested several private equity ‌firms were considering bidding for the firm.

Reuters named Blackstone Inc and Clayton, Dubilier & Rice LLC as among those PE firms in the early stages of exploring bids for the owner of Cornetto and Ben & Jerry's which was spun out of ​Unilever PLC less than six months ago.

According to Reuters sources, the PE firms are monitoring Magnum's share price, and performance, before deciding whether to make a move.

In response, shares in Magnum Ice Cream traded 11% higher at 1,248.00 pence each in London on Friday, for a market value of around EUR8.81 billion. Shares had earlier swapped hands at as much as 1,392.50p.

But analysts at JPMorgan think a deal will not be straightforward and say tax considerations may limit the potential for a Magnum takeover in the near term.

In a research note, published after the Reuters report, JPM explained that since the separation of Magnum was a tax-free de-merger, the company has agreed to refrain from actions that could create a tax liability - including for two years being restricted from engaging in "certain acquisition, merger, liquidation, sale, and stock redemption transactions".

In addition, Magnum has agreed to indemnify Unilever for any taxes or losses if the de-merger fails to qualify as tax-free.

Thus, JPM said it sees the likelihood of a takeover as "remote" given these constraints.

By Jeremy Cutler, Alliance News reporter

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