Food Industry Mergers Up In First Half Of 2011

Merger and acquisition activity rose in the first half of 2011 compared to the previous year, with the Food Institute recording 69 announced mergers and 127 closed deals through June. The first half saw an approximate 27% increase in total M&A over the same period in 2010 and about a 65% rise from 2009’s 117 total mergers.

Merger and acquisition activity rose in the first half of 2011 compared to the previous year, with the Food Institute recording 69 announced mergers and 127 closed deals through June. The first half saw an approximate 27% increase in total M&A over the same period in 2010 and about a 65% rise from 2009’s 117 total mergers.

Much of the growth was seen in private equity involvement in acquisitions of food-related assets. Investment firms and banks were responsible for 39 mergers and acquisitions in the first six months of 2011, compared with 24 the previous year. In the food industry, notable deals by private equity firms included BJ’s Wholesale Club entering into a definitive agreement to be acquired by affiliates of Leonard Green & Partners, L.P. and funds advised by CVC Capital Partners in an all cash transaction valued at approximate $2.8 billion. The Wendy’s/Arby’s Group, Inc. also agreed to sell Arby’s Restaurant Group, Inc. to a buyer formed by Roark Capital Group for $430 million. Roark Capital will also purchase Il Fornaio, which operates restaurants and bakeries, from Bruckmann Rosser Sherrill & Co.

In more recent news reports from The Food Institute Report, Crumbs Holdings LLC, the largest US-based retailer of cupcakes, was approved by NASDAQ for the listing of its common stock following its merger with 57th Street General Acquisition Corp.’s subsidiary 57th Street Merger Sub.

Private equity activity is up across all industries, rising 42% over 2010 to $113 billion and fueled by mid-size deals. With leveraged buyouts out of favor among companies, anything larger than the mid-level $10 billion to $15 billion deals are unlikely in 2011, according to analysts.

Deals among food processors of all segments and sizes increased this year, with 45 deals either announced or completed, a rise of nearly one-third from 2010 and 50% over 2009.  Specialty food makers continue to be an attractive target for acquisitions, and deals were made for a variety of businesses.

Meyer Natural Foods acquired organic beef brand Dakota Beef, securing a long-term supply of organic Angus calves born on Dakota Beef’s 150,000-acre organic ranch in Oregon. Amy’s Kitchen, Inc. spent some capital on a former Sara Lee building in Greenville County, SC, which will be updated with new machinery and equipment.

Meanwhile, Sara Lee Corp. acquired Aidells Sausage Company for $87 million in cash. Among gourmet and specialty sauce and condiment manufacturers, Beaverton Foods Inc. acquired Pacific Farms, making it the largest processor of wasabi products in North America.

The difference among buyers and sellers, within specialty foods and the entire industry, demonstrate that freer capital is enabling strategic buyers to expand their own production or distribution and leading to sensible deals that provide immediate benefits to those involved.

The Food Institute racks mergers and acquisitions in the food industry and has an exclusive database of this activity on its website at www.foodinstitute.com.