An Analysis of the Proposed Merger Between Danish Crown and Tican

Anne Hald Pedersen & Christian Lerche Neergaard

Student thesis: Master thesis


This thesis presents an analysis and evaluation of the merger between Danish Crown and Tican which was proposed in early 2015. Danish Crown and Tican are both cooperative slaughterhouse based in Denmark but with global operations, although Danish Crown is significantly larger than Tican. The merger would have created a company with more than 28,000 employees and revenues of 63 mDKK. The business case behind the merger is analysed and the attractiveness of the business case as well as compensation to the cooperative members are evaluated. While the merger ultimately did not go through, this thesis addresses the motivation and value behind the merger and estimates potential synergies up to 440 mDKK created. The business case is estimated through an explanatory case study, starting with the context and environment of the merger before moving on to estimation of the value created. The business case is assessed through a present value model, supplemented with relative valuation approaches built upon an extensive strategic analysis. The synergies are derived as the residual between the post-merger enterprise value and the estimated stand-alone valuation Tican had been searching for a financial partner due to declining short term profitability that had caused the cooperative to shrink their equity reserves, whereas Danish Crown were looking to stabilize raw material input in their home market which in recent years had experienced declining volume growth. Tican had demonstrated high historical growth and value creation, however was found to lack the economies of scale to compete in an industry with highly consolidated competitors and a fierce competition on prices and margins. The proposed merger was ultimately withdrawn, since the commitments that Danish Crown was willing to undertake to have the merger approved by the Danish Competition Authorities were insufficient. In an attempt to model this, an extensive scenario analysis is introduced, outlining the impacts that requirements demanded by the Competition Authorities could have on the value created. The thesis is thus based on a theoretical foundation and analyses the motivations behind the merger and the value that could have been created for the cooperative members in Danish Crown and Tican. The business case analysis yields a base case present value of 440 mDKK in synergies and concludes that the cooperative members in both companies would benefit economically from the proposed merger. The extensive scenarios and downfalls of the merger are analysed in debt which concludes that the value created is highly susceptible towards assumptions made on the critical input in this thesis as well as the realization of the estimated synergies.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2016
Number of pages222