Financial Firms Increase Focus On Food

The fiscal third quarter of 2010 proved to be a very eventful one for mergers and acquisitions according to The Food Institute, which has been tracking M & A activity in the food industry for the past nine decades. A total of 72 deals were closed at the quarters ending September 30 - up 41.3% over the comparable period of 2009.

The fiscal third quarter of 2010 proved to be a very eventful one for mergers and acquisitions according to The Food Institute, which has been tracking M & A activity in the food industry for the past nine decades. A total of 72 deals were closed at the quarters ending September 30 - up 41.3%  over the comparable period of 2009.

After a decline in merger and acquisition activity in 2009, particularly in the first quarter of that year, total acquisitions have increased in every six month period, and already in 2010 there are only nine fewer acquisitions than in all of 2009. If the growth in mergers from the second quarter to the third is maintained in the fiscal fourth quarter of 2010, there will be a marked increase in total mergers and acquisitions in 2010 compared with the prior year according to Brian Todd, President & CEO of the trade association.

Investment firms and banks increased their presence in the food industry in the previous three months, getting involved in 14 mergers and acquisitions between July and September compared with 24 deals in the first six months of the year. Within this segment, the most significant food industry deal of 2010’s second half was the 3G Capital acquisition of Burger King Holdings, Inc. for $4 billion. The Burger King system operates more than 12,150 restaurants in all 50 states and in 76 countries and U.S. territories worldwide. Along with other investment bank/restaurant deals such as the 214-location Logan’s Roadhouse, Inc. acquisition by an affiliate of private equity investment firm Kelso & Company and the first-half acquisition of CKE Restaurants, Inc. by an affiliate of Apollo Management indicate a trend of restaurant chains by private investment firms.

The largest single increase in mergers and acquisitions was in the aggregate “Food Processors” category, as the 60 acquisitions through the first nine months of 2010 doubled the previous year’s total. In the July through September period, acquisitions among food processors increased 76.5% over the totals from the first two fiscal quarters of 2010 combined. Multi-product processors accounted for the largest increase in terms of volume, as there were nine more acquisitions either announced or completed in the third quarter than the period of January through June, while fruit and vegetable processors doubled their totals.

Within the Food Processor category, the American Italian Pasta Company was acquired by Ralcorp Holdings, Inc.'s wholly-owned subsidiary Excelsior Acquisition Co. for approximately $1.2 billion,a deal that further bolsters Ralcorp’s considerable holdings. 
In other deals, The Hain Celestial Group, Inc. acquired Washington-based specialty yogurt producer 3 Greek Gods LLC, expanding its range of specialty, natural and organic brands. The Campbell Soup Company also entered into an agreement to sell its Wauseon, OH-based German Village Products pasta plant to Philadelphia Macaroni Company, which manufactures dry, frozen and specialty pasta for industrial, institutional and contract retail customers. Internationally, Tim Hortons Inc. agreed to sell its 50% interest in the Maidstone Bakeries business to joint venture partner Aryzta AG for gross proceeds of C$475 million.

Although the snack food segment did not see much activity in the fiscal third quarter 2010, a major deal was reached between Lance, Inc. and Snyder's of Hanover, Inc. to combine in a stock-for-stock merger that will create a combined company to be called Snyder's-Lance, Inc. with  combined net sales of approximately $1.6 billion. In the soft drink/bottler category, Green Mountain Coffee Roasters, Inc. revealed that it would acquire all the outstanding shares of LJVH Holdings, Inc. , which roasts and markets gourmet coffee for home and office consumption and distributes it through its direct-to-store delivery and coffee services networks in Canada and the U.S. The cash purchase of LJVH from an affiliate of Littlejohn & Co., LLC, a private equity firm, was valued at $890 million.

The Food Institute tracks mergers and acquisitions each week in its Food Institute report and summarizes that data annually in a special industry report. To find out more go to www.foodinstitute.com.