Food Industry Mergers Trending Lower

Mergers and acquisitions within the food industry in the third quarter of 2012 were down from the previous two quarters and were down about 18.2% from the previous year, according to The Food Institute, which has been tracking divestitures in the food industry for over three decades.

Mergers and acquisitions within the food industry in the third quarter of 2012 were down from the previous two quarters and were down about 18.2% from the previous year, according to The Food Institute, which has been tracking divestitures in the food industry for over three decades.

Investment firms and banks who were involved in 15 deals in the third quarter last year and 29 in the first half of the year, only engaged in 11 mergers and acquisitions in the third quarter of 2012. Food processors continued to post comparably strong numbers in a down quarter, contributing about 30% of the year-to-date totals from July through September. Overall, mergers and acquisitions in the food industry during the third quarter of the year account for about 28.3% of the total this year, suggesting a minor slowdown but not a significant change in pace for the year.

M&A activity was seemingly down across the board during the third quarter, with private capital more absent in the food industry than in 2011. Through the first three quarters of the year, investment firms and banks acquired assets in 40 separate deals, down almost 26% from the 54 total deals from Q1-Q3 in 2011. Mergers and acquisitions of all venture-backed companies, not just food companies, dropped 32%, to 99 in the third quarter, reversing an upward trend seen over the first half of the year, according to Dow
Jones VentureSource.

The median price paid for a company also fell to $60 million, from $85 million in the third quarter of last year, the DOW JONES report found.
Across all industries, the largest deal in the third quarter of 2012 was the KRAFT FOODS INC. sale of its North American Grocery Business to shareholders, who received one share in the new company for every three they held of the original company. THE HILLSHIRE BRANDS COMPANY, formerly SARA LEE CORP., also spun off assets, separating its international coffee & tea business and completing a one- for five reverse stock split of its shares of common stock. The international coffee and tea business became D.E MASTER BLENDERS 1753.

The third quarter also ended with 10 IPOs of U.S. venture backed companies, the fewest since the fourth quarter of 2011 and one fewer than the past year’s third quarter. The environment was viewed as poor enough for DAVE & BUSTER’S ENTERTAINMENT to withdraw its proposed initial public offering, as unfavorable conditions led the company to revise its expectations to about $100 million from $150 million between July 2011 and September 2012.

New York based FAIRWAY MARKET also revealed it was seeking $150 million when it filed its IPO paperwork recently, though the retailer may also reconsider the market before it is listed.

Within the snack food sphere, in addition the Mondelez-Kraft split, two deals made by industry players will further the trend of consolidation in the business, with SNYDER’S-LANCE INC. agreeing to acquire SNACK FACTORY, LLC and UTZ QUALITY FOODS, INC. buying brands and certain assets from THE BACHMAN COMPANY.

The Snyder’s-Lance acquisition, for about $340 million in cash, is expected to increase Snyder’s-Lance’s estimated 2013 net revenues by about $160 million and add the Pretzel Crisps brand to its portfolio; Utz will acquire the Bachman, Jax, Thin’n Right and Chipitos brands while Bachman will change its name to SAVOR STREET FOODS and develop its private-label business.
Other notable deals include the CAMPBELL SOUP COMPANY acquisition of BOLTHOUSE FARMS for $1.55 billion in cash, adding with the Green Giant brand, significant market positions in fresh carrots and super-premium beverages to

Campbell’s lineup. Germany-based JOH. A. BENCKISER agreed to acquire PEET’S COFFEE & TEA INC. for approximately $1 billion, CONAGRA FOODS acquired the

Bertolli and P.F. Chang’s Home Menu frozen meals businesses from UNILEVER PLC for $267 million while DINEEQUITY refranchised 39 APPLEBEE’S company-operated restaurants in Virginia, concluding its 2008-initiated refranchising program.

GROUPON INC.’s acquisition of SAVORED also marked its eighth venture-backed acquisition for the year, the most by any corporate acquirer.
Tp keep abreast of all of the deals in the food industry o n an ongoing basis, be sure to turn to The Food Institute at www.foodinstitute.com