Saputo Inc. tumbled as much as 7.8 per cent after Spruce Point Capital Management published a negative report, arguing that the Canadian dairy producer has overpaid for acquisitions that aren’t working out. 

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Spruce Point said it’s short the stock and sees 40 per cent to 60 per cent downside. Saputo said the investment firm has “never engaged with the company” and that its report is misleading and contains incorrect information.  

Saputo shares were down 4.8 per cent as of 3:28 p.m. in Toronto, falling to their lowest since Nov. 11. 

The Montreal-based company has made a number international acquisitions in recent years. In 2019, it bought UK-based Dairy Crest Group for £975 million (US$1.2 billion), not long after closing a deal for Australia’s biggest dairy processor.  

 “Spruce Point believes there are multiple acquisitions across the globe where Saputo overpaid for companies that did not ultimately stimulate organic growth,” Spruce Point said. The company is “now in the decline and restructuring phase of its growth as it struggles against negative forces,” such as falling dairy consumption, rising environmental costs and inefficient operations. 

“After factoring in Canadian dollar currency depreciation, we estimate just 2.4 per cent of organic revenue growth in the last five years,” the investment firm wrote.

“Saputo is of the opinion that the report is without merit and that it contains mischaracterizations and incorrect information, which are misleading and solely intended to benefit the author,” the company said in an emailed statement. The firm “remains focused on its Global Strategic Plan initiatives and driving sustainable, profitable growth for all its stakeholders.”

In its fiscal second quarter, Saputo reported adjusted earnings before interest, taxes, depreciation and amortization of $369 million (US$272 million), up 30 per cent over the prior year, as inflationary cost pressures were mitigated by higher pricing.

Six of the nine analysts tracked by Bloomberg rate the stock a buy, while two see it as a hold and one recommends selling it.