What will happen to Chr. Hansen after PAI? A valuation based on a change in ownership structure

Dines Michael Poulsen & Daniel Ulrik Leile

Student thesis: Master thesis


This thesis seeks to uncover ownership structure effects in relation to a company valuation. This is done through a practical approach where governance theory is applied to valuation methods. The foundation of the thesis is an application of ownership structure effects on the valuation of the Danish food additive producer Chr. Hansen. Chr. Hansen is a perfect candidate for this topic since the company has undergone many ownership structure changes the last 20 years. Chr. Hansen has recently been relisted on the Danish stock exchange after being privately owned the last 5 years by PAI Partners, a private equity firm. PAI still holds 37% of the shares but an imminent exit strategy seems very likely. This leads to uncertainty among the investors as the company’s future is at a crossroad. Four ownership structure scenarios are used to assess the value of 4 different ownership outcomes. The following ownership related elements have been identified in the case of Chr. Hansen: Divestment of products areas, administration costs, R&D expenses, capital structure and illiquidity premium. The observed market price for Chr. Hansen is DKK 116.This is in good accordance with our base case DCF/EVA valuation of 122,3 and relative valuations. The four ownership scenarios lead to a fair price ranging from DKK 114,50 to 156,30. The highest stock price is observed where several controlling institutional owners are present, and can be explained by a mix of positive effects from ownership concentration and a low illiquidity premium. The lowest price is found where one large dominating owner is present. This is despite a very positive effect on the budget and capital structure, caused by the negative impact a dominating ownership has on the illiquidity premium. This thesis has shed some light as to how one can include ownership related issues in a practical valuation. Quantifying the variables is however a field where further research is needed. Forecasting the future ownership structure is very difficult task that this thesis does not provide an answer to. Despite this, if the investor has incorporated an ownership structure scenario analysis in his valuation, he can instantly adjust his target value when an ownership change is announced. The results in the thesis indicate that the ownership structure can have a significant impact on a fair value of a company. We therefore recommend investors to incorporate scenarios analysis in valuations where a significant change in ownership is likely to occur.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2011
Number of pages151