Food Mergers Up In 2011, But Slow In Second Half

The Food Institute recorded a total of 384 mergers and acquisitions among food companies in 2011, a substantial increase of about 21% or 67 more deals than the the 317 deals in 2010. While the numbers are comparatively high when considering the lull in activity 2009 that followed the recession, with mergers dipping to 264 from the 422 tracked in 2008 as financing dried up on many fronts.

The Food Institute recorded a total of 384 mergers and acquisitions among food companies in 2011, a substantial increase of about 21% or 67 more deals than the the 317 deals in 2010. While the numbers are comparatively high when considering the lull in activity 2009 that followed the recession, with mergers dipping to 264 from the 422 tracked in 2008 as financing dried up on many fronts. The latest 21% rise in activity reflects growing M&A interest in growing segments, such as online services and analytics, and the re-entry of private capital and investors into the food industry.

The Food Institute has been tracking mergers and acquisitions in the food industry since its inception back in 1928 and continues to report on these transaction each week in The Food Institute Report.

The first half of the year got off to a quick start with a combined 196 announced and finalized mergers, a rise of approximately 27% over the previous year, and the pace continued within the food industry with 190 mergers and acquisitions reported during the second half.
After engaging in fewer food industry mergers and acquisitions, private equity returned in 2011 and became involved in 69 deals, an increase of 50% over the 46 in 2010 but still under the two consecutive years of 96 mergers and acquisitions recorded in 2009 and 2008. Globally and across all industries, private equity-backed deals accounted for 11.9% of mergers and acquisitions activity and increased 32.2% compared to 2010, totaling $306.3 billion, according to Thomson Reuters. Within the food industry, investment firms and banks were responsible for about 18% of acquisitions in 2011, compared with about 14.5% in 2010.

One segment targeted by investment firms and banks in 2011 was retail, which saw Leonard Green & Partners, L.P.-affiliate Beacon Holding Inc. acquire BJ’s Wholesale Club in a $2.8 billion, all-cash transaction that was closed in the fourth quarter of the year. Discounter 99 Cents Only Stores also entered into a definitive agreement in October to be bought by private-equity firm Ares Management LLC and the Canada Pension Investment Board for approximately $1.6 billion.

Still, one of the most significant deals of the year occurred within the supermarket category, with BI-LO, LLC and Winn-Dixie Stores, Inc. agreeing to merge and create an organization of approximately 690 grocery stores in eight states throughout the southeastern U.S. The deal is valued at about $560 million, and seemingly caught the supermarket industry by surprise as many players were focused on internal operating initiatives to drive sales growth.

Among other deals were: Ralcorp Holdings, Inc. completed its acquisition of the North American private brand refrigerated dough business of Sara Lee Corp., and Sara Lee Corp. also entered into an agreement to sell a majority of its North American foodservice coffee and tea operations to The J.M. Smucker Company for $350 million. News of a company audit and SEC probe into Diamond Foods, Inc.’s accounting practice for crop payments also pushed back the expected closing date of its purchase of the Pringles brand from Procter & Gamble from the end of the year to the first half of 2012.

And in 2012, the Food Institute will continue to track activity in the merger arena with no slowdown is seen in the near future. For more go to www.foodinstitute.com.