Mergers and acquisitions in Europe’s food sector bounced back last year, boosted by increased activity at the top end of the market, with the total disclosed value of deals up 44% to €10.5bn, compared to €7.3bn in 2004, according to a new report by the consumer products corporate finance team at PricewaterhouseCoopers LLP. The number of deals was also up 11% to 350, compared to 315 in 2004.
Private equity investors continued food sector acquisitions, buying 68 companies last year in deals worth a total of €2bn. This compares with 57, totalling €2.6bn, in 2004. Landmark private equity deals in 2006 included the acquisition of Orangina SA by Blackstone Group and Lion Capital; the disposal of Heinz’s European seafood business to Lehman Brothers Merchant Banking; the sale by BC Partners of Galbani, Italy’s largest cheese maker, to the French dairy group Lactalis, and CapVest’s acquisition of Findus, the Swedish frozen food manufacturer, from EQT Partners. In addition, with a number of deals valued at over €100m awaiting completion at the close of 2005, and with major divestment programmes announced by Unilever, Cadbury Schweppes, Campbell and Heinz, corporate activity in the European food arena looks set to increase further in 2006.
Private equity firms exited from 25 food companies last year (compared with 27 in 2004), with realisations of particular interest including the Initial Public Offering of RHM, Montagu Private Equity’s sale of Marlow Foods and the divestment of the Noon Group by Bridgepoint Capital.
While the European food sector generally remains attractive to private equity houses, the volume of unquoted investments in the UK by private equity firms declined last year to seven deals from 11 in 2004. This reflects not a reduced appetite by private equity firms, but rather a resurgence in the importance of corporate buyers in the sector: the auction of HP Foods attracted a broad spread of well-qualified trade interest.
Spain remains the hot target destination for private equity houses. No fewer than 15 Spanish food businesses were bought by private equity houses last year (compared with nine in 2004). Benelux also remained active with nine private equity-related deals (there were 11 in 2004), bolstered by the acquisition by NPM Capital in the Netherlands of Premier Foods’ Dutch canned vegetable business Jonker Fris and Premier Foods BV, as well as Heinz’s Hak brand of preserved vegetables.
While the number of UK deals in the European food sector as a whole increased slightly last year – to 59 from 56 in 2004, Scandinavia saw the most conspicuous rise in deals, with 23 more food sector transactions in 2005, including a run of deals in the rapidly consolidating fish and seafood sector.
Food industry deals in Central and Eastern Europe (CEE) increased from 43 in 2004 to 59 last year, mainly due to 15 taking place in Serbia and Montenegro, where none were recorded in 2004. This activity illustrates the growing stability of these less-developed areas of the CEE region and the quest by Western companies for less expensive sources of labour near the large European Union market.