Acquisition opportunities ripe for the picking: report

According to a report released today from Grant Thornton Australia, mid-sized food and beverage businesses need to formulate growth plans or exit strategies in order to capitalise on the increasing number of acquisition and divestment opportunities available in the sector.

The report titled Bite Size, found that despite challenging market conditions globally, Australia has had more food and beverage acquisition targets than any other country in the Asia Pacific region.

According to the report, Australia is ranked as having the fifth highest level of food and beverage transactions globally during the January 2011 to March 2014 period.

Cameron Bacon, Food & Beverage Partner, Grant Thornton Australia said that now is the time for medium sized businesses in the industry to capitalise on either investment of divestment opportunities.

“Acquisition opportunities within the Australian food and beverage sector are receiving interest from local, international and private equity buyers. Fuelled by the sector’s prime position to service Asia’s growing demand for high quality food products, CEOs and owners within the sector need to ensure their businesses are well positioned to capitalise on current opportunities within the sector,” he said.

Bacon said that buyers are heavily focused on the food segment which makes up 75 percent of total transactions within the food and beverage manufacturing sector. In addition, Bacon noted that the report revealed higher valuation multiples were achieved by businesses with strong brands in premium segments.

“As the trading and transaction multiples of Australian food and beverage companies are often lower than equivalent companies in North America or Europe, we will continue to see strong interest from international buyers seeking the opportunity to purchase good quality companies for a reasonable price that are well positioned to benefit from growing Asian demand,” he said.

 

JBS S.A. makes a $5.6 billion bid for Hillshire Brands Co

Brazilian food processing company JBS S.A. has made a $5.6 billion bid for Hillshire Brands Co. (HSH), in an attempt to expand its sausage line-up and derail the company’s acquisition of Pinnacle Foods Inc (PF).

JBS’s Pilgrim’s Pride Corp. (PPC) unit offered $45 a share, but the deal is contingent on Chicago-based Hillshire scrapping its $4.8 billion agreement to acquire Pinnacle, Bloomsburg News reports.

Pilgrim’s said it met with Hillshire in February and that it “has long been our desire to acquire the company.”

JBS chief executive officer Wesley Batista said last week in an interview with Bloomberg N ews that his company will keep expanding as opportunities arise. In the U.S., JBS bought Smithfield Foods Inc.’s beef-packing business in 2008 and gained control of chicken processor Pilgrim’s the following year.

 

R&R buys Peters Ice Cream

French ice-cream giant R&R have bought Peters Ice Cream for an undisclosed amount.

It is a return to European ownership for the Australian firm, which was owned by Swiss food conglomerate Nestle before being sold in 2012 to Pacific Equity Partners, ABC News reports.

Last week, Peters’ private equity owners entered into exclusive negotiations with R&R, with the company expected to sell for over $400 million.

Peters' chief executive Stephen Audsley says little should change for the company's 500 Australian employees.

"With the backing of R&R, Peters will continue to invest in its market leading brands including Drumstick and Connoisseur and in its long history of innovation," Audsley said. "Manufacturing will continue at our world class facility in Mulgrave from which we intend to create new opportunities for growth."

R&R Ice Cream started in north-Yorkshire in Richmond Ice Cream in 1985, and following a series of mergers and acquisitions now owns nine factories across the UK and mainland Europe.

R&R is owned by PAI Partners after the European private equity firm bought the business in the middle of last year.

 

Wilmar and First Pacific raise bid for Goodman Fielder

In the bid for Goodman Fielder, Wilmar International and First Pacific have raised their 65 cents per share offer to 70-cents a share, provided major shareholders and the Goodman board pledge their support.

Goodman Fielder has today obtained a trading halt from ASX and NZX to give the company time to consider the proposal.

The revised proposal is lower than major shareholders hoped for, but it’s believed to have the backing of Ellerston Capital, which holds 13 per cent, and Perpetual Investments, which holds 12.2 per cent, the Sydney Morning Herald reports.

Perpetual and Ellerston have previously said they would not accept an offer below 70 cents per share, but Goodman's major shareholders have reportedly become frustrated with the board's refusal to engage with Wilmar and First Pacific and are believed to be willing to cash in their investment at the revised offer price.

The bid is following an unsucessful offer from Wilmar and First Pacific in April of 0.65 cents per share, which the board described as "undervalued" and "opportunistic".

Goodman Fielder sold its New Zealand meats business to Heller’s Limited in March as part of a strategy to “optimise its portfolio by refocusing its marketing and capital expenditure on its core categories and brands where it has profitable, market leading positions.”

The changes are following the issuing of a profit downgrade after profits plummeted due to a lower selling price for baked goods, poor performance from its groceries division and higher farmgate milk prices

Earnings have come up to $27 million lower than its previous full-year profit guidance of around $180 million.

 

tna acquires US food processing equipment supplier FOODesign

Global food packaging solutions supplier, tna has announced its acquisition of Oregon based food processing equipment supplier, FOODesign.

The acquisition will see tna expand its current portfolio to offer food manufacturers a broad selection of processing solutions including FOODesign fryers, cookers, speciality roasting equipment, as well as baking and toasting ovens.

Managing director of tna, Michael Green said the move to purchase FOODesign will enable the company to meet the industry’s growing need for flexible and efficient turnkey solutions.

“With FOODesign providing equipment to many of the top 100 food processing companies in the world, the acquisition gives tna access to all the necessary skills, networks, market knowledge and relationships to provide customers with a new choice in processing equipment – from fryers and feed systems through to packaging and controls. We are confident that we can add value to our customers’ entire line and achieve significant economies of scale.”

Joseph Mistretta, president of FOODesign said that joining the tna group represents an exciting prospects for both the company and its customers.

“Up until now, our business has primarily focused on North America. Our acquisition by tna instantly opens up a wealth of opportunities, giving us access to a global and extensive sales network, and maximising our ability to service our international customer base more effectively.”

 

Amcor acquires Indonesian packaging firm for $27m

Amcor has announced it’s entered into an agreement to acquire Bella Prima Packaging, an Indonesian flexible packaging business, for $27 million.

Bella Prima has two plants in Jakarta specialising in the high growth shrink sleeve, label and lidding businesses and sales for calendar year 2013 were approximately $30 million.

Amcor has one flexibles packaging plant in Indonesia and this new acquisition forms part of the company’s plans to broaden its product portfolio, said Ken Mackenzie, managing director and CEO of Amcor.

“Indonesia is an attractive market for flexible packaging given its rising per capita income and changing retail formats. The Bella Prima acquisition gives Amcor the opportunity to broaden its product portfolio in attractive end market segments and deepen our relationships with key customers. Given the expected synergy benefits, it is anticipated returns will exceed 20 percent by year three.”

Earlier this year the ACCC announced it would not oppose Amcor’s acquisition of Detmold Group’s Australian flexible packaging operation. Detmold competes with Amcor in the supply of value-added flexible packaging, particularly to manufacturers of fast moving consumer goods.  

“The ACCC concluded that the acquisition of Detmold’s Australian flexible packaging operations would be unlikely to substantially lessen competition,” ACCC chairman Rod Sims said. 

 

Forrest buys Harvey Beef for $40m

Harvey Beef has been sold to mining billionaire Andrew Forrest in a deal believed to be worth $40m.

Harvey beef is WA’s biggest beef exporter, and the only one accredited for exports to China, The West Australian reports.

Forrest pledged to invest in upgrading the abattoir which processes about 145,000 cattle per year and plans to open up live cattle exports to China.

The deal signed in Perth between Forrest’s company Minderoo and a Hong-Kong based private equity fund returns Harvey Beef to local hands for the first time in almost a decade.

“Following detailed discussions with the Chinese leadership, we are determined to ensure that the Australian agricultural industry’s future in China is just as bright as our mining future,” Forrest said.

The Harvey Beef plant is 140km south of Perth and employs about 300 people.

“We hope this acquisition will send a strong message of confidence in the future of the industry,” Forrest said. “To provide confidence to increase supply and make Australia the supplier of choice to meet Asia’s long term food security requirements.”

Forrest has been pushing to secure a deal with China for live cattle exports since last year.

Forrest and Australian agribusiness Elders have been working together to create a supply chain into China and talks with senior Chinese officials in WA surrounding the relaxing of Beijing’s strict quarantine laws represent a significant step towards the venture becoming a reality.

Minderoo will take ownership immediately and has no plans to change the current management team.

 

Pernod Ricard acquires US winery

Pernod Ricard has bought its first US winery, in a move the company says will boost sales of labels including Australian-made Jacob’s Creek.

Jean-Christophe Coutures, chief of Pernod Ricard Winemakers, said the purchase of Kenwood Vineyards of California from US wine company F Korbel & Bros would rapidly expand Pernod’s reach in the US via Kenwood’s distribution network across 50 states, The Australian reports.

“We are only No 16 in the US wine market, whereas in every other large wine market in the world we’re in the top three wine companies,” Coutures said. “The big issue we have is access to distribution, and Kenwood gives us larger and stronger distribution access which will benefit the rest of our brands.”

“We have big ambitions in China and the US — but we didn’t have any brands in the US, and US-made wine represents 80 per cent of consumption there, so in order to be credible and reach our goal of doubling our business in the US, we needed to make an acquisition,” Coutures said.

Coutures said Pernod would be interested in buying the US assets of Australian wine major Treasury Wine Estates, which owns several wineries including Beringer, Stag’s Leap and Chateau St Jean.

According to The Sydney Morning Herald, Treasury Wine Estate has denied being approached by or being involved in talks with Pernod Ricard.

Treasury Wine Estates managing director Michael Clarke has stated that the US wine business is an integral part of the company and is not up for sale.

Last month, TWE confirmed that the company needed to address its costs structure in order to improve shareholder value. Clarke said this could include cutting jobs and selling poorer performing commercial wine brands across its extensive portfolio which consists of 83 labels from Australia and abroad.

 

Tetra Pak acquires Miteco to enhance beverage capabilities

Food processing and packaging company, Tetra Pak, has acquired Switzerland-based Miteco, which provides production solutions for soft drinks, fruit juices, liquid foods and carbonated soft drinks.

Established in 1982, Miteco is a privately held company with 70 employees across sites in Switzerland, Italy, UK and South America, with its acquisition extending this reach to the more than 170 countries that Tetra Pak has established business in.

"The acquisition of Miteco positions Tetra Pak as a world leader in production solutions for carbonated soft drinks, with an unrivalled product portfolio backed by strong technical support and broad geographic presence,” said Tim High, executive vice president of Tetra Pak Processing Systems.

“It also extends the company’s beverage production capabilities in a number of key areas, including sugar handling, dissolving, refining, mixing and blending beverage ingredients, providing an important complement to our existing portfolio of processing solutions.”

 

Hillier’s and Newman’s chocolate brands acquired by Re:Capital

Australia’s first chocolate manufacturer, Ernest Hillier, has been snapped up by Re:Capital, which plans to take the Hillier’s and Newman’s brands overseas.

Re:Capital is the international investment arm of British restructuring company, Hillco, and according to SmartCompany, the Piedmonte family, which owned Ernest Hillier, sold the company for an undisclosed amount to Re:Capital and local private investors.

Now the majority shareholder, Re:Capital will preserve the Hillier’s chocolates name as well as its facilities, and plans to take the brand overseas while also exploring opportunities in Australia.

Ernest Hillier’s chief executive, Mark Campbell, said the Piedmonte family decided to sell because they wanted to move away from manufacturing and focus on their supermarket and distribution assets.

“As part of that they looked at options to sell the chocolate business and part of the reason is the current operating environment and stresses on manufacturing really required some specialist attention,” he told SmartCompany.

Ernest Hillier celebrates its 100th birthday this September.

 

Goodman Fielder to axe 125 jobs with Hamilton factory closure

125 New Zealand workers could lose their jobs with the closure of Goodman Fielder’s Frankton facility.

According to First Union, managing director of Goodman Fielder NZ, Peter Reidie called workers into a meeting at 7am this morning and confirmed that the factory will close by the end of March, the Weekly Times Now reports.

"There was a combination of disappointment and relief amongst workers,'' FIRST Union general secretary Robert Reid said.

"While workers were disappointed to hear the news that the site would close and they would be make redundant, there was also relief that after a month of waiting the final decision had been made.''

Workers were informed by the company on January 8 that it had agreed to sell its NZ meat division to local meat processor, Hellers in order to repay debt.

Goodman Fielder has also stated that it will sell its pizza business to Mommas Frozen Products.

Reid said that the union will work with both Goodman Fielder and government agencies to ensure that affected staff receive full support throughout the closure.

 

United Dairy Power sold for $70m

Australia’s biggest privately-owned dairy processor, United Dairy Power, has been sold to Hong Kong-based businessman William Hui for approximately $70 million.

According to theland.com.au, Hui is chairman and a major shareholder in the CD, DVD and video cassette manufacturer Swing Media Technology and was attracted to UDP because of the growing demand in Asia for milk powders, cheeses, infant formula and other dairy products.

The high quality products generated by Australia’s dairy industry, combined with its food safety standards and proximity to Asia make it an appealing investment, and UDP’s acquisition comes less than a week after Canadian firm Saputo snapped up a 77 percent majority in Warrnambool Cheese and Butter.

UDP operates in South Australia and Victoria and generates annual sales of more than $200 million and profits of more than $15 million. Previous to its sale to Hui, it was wholly owned by its chief executive and founder, Tony Esposito, who, it’s reported, will remain involved with the business.

 

Saputo snaps up 77 percent stake in Warrnambool

Saputo’s stake in Warrnambool Cheese and Butter keeps growing, with the Canadian company’s hold on the brand now sitting at 77 percent.

The rise from 58.84 percent to 77 percent automatically lifts share prices from $9.20 per share to $9.40, and further extends the offer’s closing date to 12 February.

According to The Land, Saputo has said that all shareholders who accept the offer will receive the extra 20c per share, regardless of when they accept.

If Saputo’s stake in Warrnambool hits more than 90 percent, its offer per share will rise to $9.60, but the likelihood of this is unknown with Lion, a 10 percent shareholder, releasing a statement confirming it has “no current intention to accept Saputo’s takeover offer.”

Earlier this month fellow bidder Bega announced plans to sell its 18.8 percent stake in Warrnambool to Saputo, a move that’s expected to deliver a windfall profit of $61.8 million.

 

Goodman Fielder denies second bid launched for Frankton site

Goodman Fielder has denied a formal bid has been made for its Hamilton meat business as 125 jobs at the facility remain in jeopardy.

As announced earlier this month, Goodman Fielder has decided to divest its New Zealand meat and pizza businesses, viewing them as non-core categories for the food manufacturing company.

An employee consultation process is underway after Hellers proposed to by Goodman’s meat business. It has been proposed that the Frankton, Hamilton processing activities be transferred to Christchurch and Auckland sites, with 125 jobs lost.

Fairfax reports that the FIRST Union has claimed another bid by a “consortium of investors” had been made.

However, Goodman has denied this. A petition has been launched by a Labour MP and Hamilton City councillors have requested the Commerce Commission investigate the $17 million sale, citing Hellers market share.

"We remain in the consultation process with our employees; it is the only process we are working through, and it is confidential,” a Goodman Fielder spokesperson told Fairfax, denying that the consortium had launched a formal bid.

"We have not received a formal bid as part of that process."

 

 

Image: Fairfax

 

 

 

Saputo’s offer in WCB extended after gaining majority share

Now with a 52 percent stake in Warrnambool Cheese and Butter (WCB), Saputo’s offer for the dairy giant has been extended to 4 February.

The Canadian firm’s offer, which now sits at $9.20 per share, was due to close tonight (22 January) at 7pm, however under the Corporations Act 2001, the offer has been automatically extended due to Saputo’s share rising to more than 50 percent, as well as the increase in offer price within the last seven days of the scheduled close of offer period.

According to The Land, if Saputo obtains a relevant interest in WCB greater than 75 percent, it will increase is offer price again by 20 cents to $9.40 per share. The price rises another 20 cents to $9.60 per share if it obtains a more than 90 percent stake in WCB during the offer period.

 

Saputo boosts its stake in Warrnambool

Saputo now has a 47.85 percent share in Warrnambool Cheese and Butter (WCB), one day before it closes its offer for the dairy giant.

The Canadian firm last week increased its stake from 26.45 percent to near 45.24 percent after fellow bidder, Bega, sold its 18.8 percent stake.

Saputo’s offering, which closes today, is $9 per share, but according to SMH this price could increase to as much as $9.60 if the company attains various share thresholds in WCB at and above 50 percent.

Murray Goulburn has a 17.7 percent stake in Warrnambool and has also bid to take it over, however WCB’s board recently urged its shareholders to reject the offer, as it is highly conditional and reliant on approval from the Australian Competition Tribunal, which isn’t expected until at least the end of February.

 

Bega to sell Warrnambool shares to Saputo

Bega Cheese has decided to sell its 18.8 percent stake in Warrnambool Cheese and Butter (WCB) to Canadian firm and front-runner in the bidding war, Saputo.

According to weeklytimesnow, Bega said selling its shares would deliver a windfall profit of at least $61.8 million.

Bega kicked off the bids for Warrnambool Cheese and Butter, the board of which has expressed its support for Saputo’s $9 per share offer. With Bega’s shares, Saputo will have a more than 45 percent stake in the company.

Barry Irvin, executive chairman of Bega, said selling the shares was a responsible business decision, and that the company didn’t want to run the risk of WCB’s share price dropping after the Australian Competition Tribunal delivers its findings on Murray Goulburn’s bid.

“With the Saputo offer closing we couldn’t wait until the outcome from the (Australian) Competition Tribunal, it’s uncertain.

“At the end of the day it is a very large amount of money for our stake in WCB,” Irvin said.

Bega also announced today that its preference is for WCB to remain in Australian hands, but its sale to Saputo seriously weakens Murray Goulburn’s attempts for a takeover.

Earlier this month, Saputo increased its stake in WCB from just over 18 percent to 20.14 percent, making it the largest shareholder.

 

Beam acquired by Japan’s Suntory for $15bn

Beam, the manufacturer of Jim Beam and Marker’s Mark has been acquired by Japan’s Suntory Holdings for US$13.6 billion (A$15bn), with annual spirit sales for the combined company expected to top US$4.3bn.

According to The Australian, Suntory has a portfolio of spirits, including Yamazaki and Hakushu whiskies, as well as Midori and others.

Suntory already distributes Beam beverages in Japan and Beam does the same for Suntory products in Asian markets. The boards of both companies approved the acquisition, which requires approval from Bean Inc stockholders, and is expected to close in the second quarter.

Suntory will pay $US83.50 per share, a 25 percent premium to Beam's Friday closing price of $US66.97, with the companies putting the deal's total value at about $US16 billion, including debt.

 

Canada’s loss is Australia’s gain in Saputo bid for WCB

Canadian dairy giant Saputo Inc has lifted its stake in Warrnambool Cheese & Butter, as it creeps up the register following its A$504 million bid for Australia’s oldest dairy producer.

Saputo is pitted against well-known Australian dairy cooperative, Murray Goulburn, which is seeking approval from the Competition Tribunal, arguing the net public benefit of its takeover would outweigh any anti-competitive effects. Saputo’s bid is favoured by WCB’s board.

Australians are probably curious about who Saputo is and what it is trying to do in attempting to enter the Australian market, so far from its home base in Canada.

The strategic issue facing Saputo is fundamentally the issue facing many firms in Canada. Europe represents Canada’s past while the US represents Canada’s present but Asia represents Canada’s future. Of course Australia understood this much earlier than other western countries.

In a remarkable speech given by the Bank of Canada Governor Mark Carney shortly before he departed for the UK to become the Governor of the Bank of England, he strongly urged Canadian firms to adopt “trade diversification” strategies by seeking business opportunities in Asia. Throughout the 20th century and to the present, the US accounts for 75% to 80% of the totality of Canada’s exports.

Saputo understands that Asia, and more specifically China, is its future.

And this is where the policy history facing Saputo comes in. The critical input – milk – is far too costly in Canada due to our destructive supply management policy, meaning Saputo’s leaders have realised they need to enter Australia to establish a base there to target exports to China.

Against all odds

Saputo started out as a small family-owned company established by Italian immigrants to Canada in 1954, led by the family patriarch Giuseppe Saputo who had been a master cheese maker in Italy. That in itself is not unusual. What is unusual is that the Saputo family firm grew in the following 70 years from its base in Montreal, Quebec – Canada’s second largest city – to a very successful multinational with over CA$7 billion in sales.

However, even more unusual is that Saputo was not acquired by a larger firm – so often the case in Canada – but continued to grow while being led by père Saputo and then his children.

The success of this company was improbable because it was based in Quebec. Shortly after Saputo’s founding in 1954, the French-speaking province underwent “la revolution tranquille” or the Quiet Revolution with the election of a new interventionist Liberal government in 1960, based on the principle of “maîtres chez nous” or “masters of our own house”.

Over the next 50 years, successive Quebec governments – both separatist and federalist provincial governments – steadily ratcheted up corporate and personal taxes to finance state intervention in the economy such as Hydro Quebec. Quebec now has the dubious distinction of having some of the highest tax rates in North America, coupled with restrictive laws that compel the use of the French language in the workplace, making it difficult to recruit people from outside Quebec.

Supply management

If this was not a hostile enough climate for business, in the late 1960s the federal liberal government in partnership with provincial governments and aggressive lobbying by the dairy farmers led to the adoption of “supply management” designed to restrict the supply of milk using quotas to drive up the price of milk to farmers. Australians have their own experience with supply management and indeed wisely decided to terminate it in 2000.

However, sadly, in Canada, every political party continues to support supply management, milking and plucking 35 million Canadians to enrich 12,000 multimillionaire dairy farmers. Numerous economists, every think tank, and even the OECD have condemned this pernicious, destructive, and irresponsible policy, which has increased the price of dairy products in Canada by 50% to 100% over equivalent US products. All to no avail.

Warrnambool Cheese and Butter, located on Victoria’s Great Ocean Road, is Australia’s oldest dairy producer. AAP

A formidable investor

Notwithstanding the significant increases in milk prices, Saputo has grown gross revenues to CA$7.3 billion, becoming one of the 10 largest dairy processors in the world, the largest in Canada, third largest in Argentina and one of the top three cheese producers in the US.

Today, Saputo produces and distributes a broad range of dairy products in Canada, the US, Argentina and Europe. Its products include cheese, fluid milk, yoghurt, cream products, culture products, dairy ingredients and snack cakes.

However, dairy products account for 98% of Saputo revenues while grocery products account for only 2%. Canada, Europe and Argentina account for 56% of its dairy revenues while US dairy sales account for 42%.

Saputo’s brands, sold in more than 40 countries, include Alexis de Portneuf, Armstrong, Baxter, Dairyland, Dragon, DuVillage 1860, Friendship, Frigo Cheese Heads, Great Midwest, King’s Choice, Kingsey, La Paulina, Milk2Go, Neilson, Nutrilait, Ricrem, Salemville, Stella and Treasure Cave.

If Saputo acquires WSB, it will invest in new capital equipment in Australia to target the Chinese market, thereby benefiting Australia’s economy and workers.

Ian Lee does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

The Conversation

This article was originally published at The Conversation. Read the original article.

 

Saputo extends offer on Warrnambool bid

Saputo has extended the deadline on its $9 per share bid for Warrnambool Cheese and Butter.

According to weeklytimesnow, the Canadian dairy company has extended the deadline from today until 7pm on 22 January, but said no further extensions will be made unless its required to do under the Corporations Act 2001.

Now the largest shareholder, Saputo this week increased its stake from just over 18 percent to 21.4 percent and has offered further 20 cent step-ups in price on reaching 75 percent and 90 percent share acquisitions.

Despite offering $9.50 a share, Murray Goulburn’s bid is seen by Warrnambool as inferior to Saputo’s with board members urging shareholders to reject the “highly conditional” offer, which is subject to the granting of authorisation by the Australian Competition Tribunal.