There's been some tasty deals in the food industry lately with more such as Kraft Foods Inc. (NYSE:KFT) and Cadbury plc (NYSE:CBY) possibly on the way, signaling consolidation in the food industry.
Reuters reports that dealmaking in the food sector is likely to continue throughout 2009. And although dealmaking is down 35% in 2009, the dealmaking going on is mostly coming from
strategic buyers, according to Grant Thornton LLP. During the first quarter of 2009, there were less than 300 M&A transactions in the food industry, compared with the 415 in the fourth quarter of 2008, and many of those deals were strategic acquisitions.
That is definitely on target. Check out
The Deal's Pipeline (subscription required) for some of the most recent deals in the food sector:
- Pilgrim's Pride Corp. disclosed that JBS SA agreed to acquire a majority
stake in America's largest chicken producer for about $800 million
in cash.
- Private equity firms Blackstone Group LP (NYSE:BX) and Lion Capital LLP are selling Orangina Schweppes Group to Suntory Holdings Ltd.
- Japan's Kirin Holdings Co. Ltd. confirmed merger talks with smaller domestic rival Suntory Holdings Ltd.
- Marfig Alimentos e Comercio de Alimentos SA agreed to purchase Cargill Inc.'s Brazilian business,
Seara Alimentos Ltd., for $900 million in cash and assumed debt.
- Irish drinks company C&C Group plc agreed to acquire certain assets
of Anheuser-Busch InBev NV in the Republic of Ireland, Northern Ireland
and Scotland for about $292 million in cash.
- National Dairy LLC agreed to acquire Promised Land Dairy Distribution Inc. for an undisclosed price.
- Privates equity firm Crescent Capital Partners agreed to sell fruit juice company Simply Squeezed to Fructor Beverages Group Ltd.
- Diageo plc acquired 80% of Nantucket, Mass., cocktail mix company Stirrings LLC. Diageo owned the other 20% already.
What's surprising is that the valuations of companies in the food and beverage sector have actually risen since the winter of 2008, according to Grant Thornton's report. "As a whole, food processors in the GTCF Food and Beverage Index trade at approximately 8.9x Ebitda, food retailers trade at about 7.3x Ebitda, food distributors trade around 6.9x Ebitda and beverage companies trade at 9.9x Ebitda," the report states.
What's more, some deals are ringing in at higher valuations, such as Kraft's offering for Cadbury's, which was at 13 times Ebitda, and the Mars Inc.-Wm. Wrigley Jr. Co. deal, which
was done at 19 times
Ebitda. But due to the recession, of course, some of the deals are distressed deals such as the Pilgrim's Pride buyout by JBS. -
Maria Woehr
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