M&A Volume Down, But Deal Value Up Through First Half Of 2012

July 12, 2012

The Food Institute recorded 157 mergers through the first six months of 2012, a decline of about 20% from 2011 and paced to reach a total of 314 for the full year.

The Food Institute recorded 157 mergers through the first six months of 2012, a decline of about 20% from 2011 and paced to reach a total of 314 for the full year. One of the largest declines was in acquisitions by investment firms and banks. The Food Institute reports that through the first half of 2011, private equity engaged in 39 deals, but was behind only 28 transactions in 2012, a decrease of approximately 28%. Due to the exposure of many private equity firms to European markets, fewer investments would be expected to be made among large investors, and transactions tracked by the Food Institute reflect that.

Retailers were also involved in about 37% fewer acquisitions in the first half of this year after consolidation seemed to have run its course in the industry in 2011, while restaurant mergers remained close while exceeding the prior period’s total by one.

Notable deals included the Kellogg Company’s acquisition of Procter & Gamble’s Pringles business for $2.695 billion, completed on May 3. The acquisition was salvaged from a previous agreement between P&G and Diamond Foods that was mutually called off after controversial payments to walnut growers by Diamond resulted in the company’s restating its 2010 and 2011 fiscal years’ financial statements. Kellogg became the world’s second-largest savory snacks company with the purchase of Pringles, which earns $1.5 billion in sales across more than 140 countries.

Burger King Worldwide, Inc. also went public in a deal in which principal stockholder 3G Capital received approximately $1.4 billion in cash from a subsidiary of Justice Holdings Limited for a 29% share of the restaurant chain. The company began trading on the New York Stock Exchange on June 20. Burger King was also involved in two separate transactions of its restaurants, including the sale of 278 BKC company-owned restaurants in the Ohio, Indiana, Kentucky, Pennsylvania, North Carolina, South Carolina and Virginia markets to Carrols Restaurant Group, Inc., its largest franchisee with 574 Burger King restaurants following the purchase. Burger King also refranchised 96 company-owned Burger King restaurants in the Orlando/Daytona, FL market to Magic Burgers, LLC, a subsidiary of Sun Holdings, LLC.

Among the leaders in the food processing industry, General Mills and ConAgra were particularly active. General Mills acquired smaller manufacturers, both at home and abroad, scooping up natural snack maker Food Should Taste Good, the Brazil-based Yoki Alimentos, S.A., which markets the Yoki and Kitano brands of popcorn, snack nuts, dry soups and side dishes and Parampara’s branded range of ready-to-cook spice and sauce mixes. Omaha, NE-based ConAgra Foods was busy in 2012, acquiring Del Monte Canada, a provider and marketer of packaged fruits, fruit snacks and vegetables in Canada; agreeing to acquire Odom’s Tennessee Pride, a producer of frozen and refrigerated breakfast sandwiches and sausages with annual revenue in excess of $190 million; and purchasing the pita chip business of Kangaroo Brands.

The Food Institute has tracked mergers and acquisitions in the food industry since its founding back in 1928 and maintains an extensive online database of deals for the past decade on its website, www.foodinstitute.com.