Food & Beverage Industry Healthy Foods Sector Merger & Acquisition Update Winter 2013

Transcription

1 Food & Beverage Industry Healthy Foods Sector Merger & Acquisition Update Winter 2013 Billow Butler & Company, L.L.C. 10 South Wacker Drive Suite 2050 Chicago, IL Phone: (312) Fax: (312) For more information about BBC s Food and Beverage practice, please contact: Robert D. Billow Managing Director Food & Beverage Investment Banking bbillow@billowbutler.com

2 Mergers and Acquisitions in the Healthy Foods Sector Consumer demand for healthy food options continues to affect several segments of the food and beverage industry. Food manufacturers are offering more gluten free, allergen-free, sugar-free, salt-free and whole grain products. We are also seeing a continued expressed preference for decreased use of artificial ingredients in food products. The foodservice channel is expanding organic, seasonal or locally-sourced ingredients to menus. We also are observing more disclosure of nutritional information and reduced portion sizes. Billow Butler has observed vibrant food industry merger and acquisition (M&A) activity, particularly in some of these healthy food niches. Below is a listing of a select group of noteworthy food industry M&A transactions from earlier this year: Transaction Announced Date Buyer Seller Seller Description 8/21/2013 J.M. Smucker Enray, Inc. Offers minimally processed foods and grains 8/9/2013 Danone YoFarm Yogurt Company Produces several types of yogurts, sauces and toppings 5/23/2013 Campbell Soup Company Plum Organics, Inc. Manufactures organic baby food 5/13/2013 Danone Nurture, Inc. (Happy Family Brands) Produces healthy baby and toddler meals 5/9/2013 Attune Foods, Inc. Hearthside Food Solutions, LLC 1 Produces organic and natural cereal, granola and snacks 1/7/2013 KKR & Co. & Weld North LLC Organic Avenue, LLC Manufactures plant-based nutritional products 1 The trans actio n included the o rganic and natural cereal, grano la and s nacks divis io n o f Hearths ide Fo o d S o lutio ns Source: Capital IQ Danone and Campbell have been particularly active recently in the M&A market. On May 13 th, Danone announced the acquisition of Happy Family, a leading provider of healthy and organic foods for babies and toddlers. Then, on August 9 th, Danone acquired YoFarm Yogurt, a branded yogurt company recognized for its healthy and gluten-free yogurt with crunchy toppings packaged separately. Campbell announced on May 23 rd its intention to continue its expansion into the health-conscious food segment with its acquisition of Plum Organics, a rapidly-growing organic baby food company. This acquisition, which closed in June, is the most recent acquisition in a series of maneuvers by Campbell to establish a strong presence in the healthy food sector. Last year, Campbell acquired Bolthouse Farms, a leader in premium beverages such as juices, shakes, and smoothies, as well as packaged fresh foods, such as carrots, for approximately $1.5 billion. Of note, other major mainstream food companies are also increasingly active in healthy food M&A as well. More recently, on August 21 st, J.M. Smucker Company acquired Enray Inc., a manufacturer and marketer for organic and gluten-free grain products. Further, Post Foods, LLC acquired the organic and natural cereal, granola and snacks division of Hearthside Food Solutions through its Attune Foods, Inc. subsidiary on May 9 th. Private equity groups have also seen the potential of healthy food manufacturers as observed in KKR & Co. L.P. & Weld North LLC s joint acquisition of Organic Avenue, a manufacturer of plant-based products ranging from smoothies to entrees, in early Valuation and Regulatory Considerations While the valuation metrics for many of the recent M&A transactions are not publicly disclosed, Billow Butler has observed moderate premiums for healthy and specialty food companies relative to the overall food sector. According to GF Data, a middle-market valuation database, while we believe it to be on the increase, the average EV / EBITDA and EV / revenue multiples for food manufacturers with enterprise values under $100 million over the last two years are 6.6x.and 1.3x, respectively. Billow Butler has observed multiples for similarly-sized health / specialty food companies in excess of 7.0x EBITDA and 1.5x revenue. Multiples tend to be even notably higher for larger companies and companies with very strong brands and/or the promise of strong brand growth. Primary reasons for the higher multiples are the perceived growth of this niche as well as the premium price points often found in organic and healthy / specialty food products. From a regulatory standpoint, we continue to see some activity in the industry such as New York City s short-lived ban on large soft drinks in public venues and bans of trans fats in restaurants and bakeries in Philadelphia, New York City and California. Such policies have, to a moderate degree, affected industry participants, particularly those serving fast food, including chains like McDonald s and YUM, which now both use trans-fat free cooking oil in their establishments.

3 Observed Business Trends in the Healthy Food Sector As a transactional advisory firm that regularly consults with owners of food businesses on M&A and corporate finance matters, many readers will know that I attend several industry trade shows to visit with clients and prospects and to learn what s hot. Some of these are major shows such as Fancy Foods or Expo West and some are more exotic like SIAL or more catering to a niche, like Kosher Fest. I am always impressed by the number of new products, trends and new exhibitors that display. As an example, at Expo East I saw 14 lanes (8 aisles) of new entrants or firms with new products in its mezzanine level. In general, we see continued growth in attendance and exhibitors at these shows, with record breaking numbers of exhibitors and attendees at several shows like Sweets & Snacks Expo and Expo West. Increasing Demand for Natural and Organic / Specialty Foods Contributing to the record breaking attendance at recent foods is the fact that Americans are buying specialty foods in record numbers compared with prior years (75% in 2013) and people seem to continue to clamor in growing numbers for natural and organic foods. The push for less processed foods and transparency in ingredient sourcing has given a boost to the move to simplified foods and a cleaner / shorter listing of ingredients. Packaging Trends Some of the largest packaging boasts we have noted are related to kosher certification and also gluten free (GF). For some exceptionally attractive and inspiring packaging that can help move product across the counter and also rise to the stature of real artistry (and the creator, Karla Stahlbush, is an artist), see the associated packaging from Stahlbush Island Farms to the right. We also note a surge in the number of attractive squeezable pouches serving up single serve portions of all kinds of food for on the go munching. Food Innovations Packaging Art from Stahlbush Island Farms The overall appeal of innovative offerings or creative combinations of tastes and textures abounds with more bacon in chocolate or popcorn or popcorn in chocolate or something old, ancient grains perhaps or possibly some ethnic flavorings being wrapped in something new, producing an exciting and different taste. As noted, you certainly can see this in some of the new popcorn introductions that have come to market in the past year or so, moving popcorn well past its simple association with just butter/caramel/or cheese. Gluten Free Growth You may be confident that GF has taken root for the long term when you see booths sporting GF pizzele (Italian cookies) and ditto GMO with the advent of GMO pet foods. Indeed, GF continues to grow in the range of 20+% in some sectors and is showing expansion not just in the USA but around the world based on observations from the bi-annual Anuga trade show in Cologne, Germany where numerous countries throughout Asia and Europe were showcasing GF products in pastas, cereals and baking mixes. Snack Food We see much growth in the number of products in the snacking category which accounts for the largest category of eating occasions (53%) and within that space we note the steadfast growth of energy bars of all kinds and, so to speak, flavors, with many products packed with protein for a population on the move. I pause after walking some of the aisles to smile and wonder if at some point my diet will be comprised of some combination of functional beverages or waters combined with deliciously appealing bags of chips or popcorn, nutritional / energy bars or maybe something out of a simple squeezable packet!

4 Overview of Billow Butler & Company Billow Butler & Company is a leading middle market investment banking firm. Our global reach, extensive experience, knowledge of the food and beverage industry, and middle market M&A deal making track record are unmatched. Our clients are individual owners or families that have guided the success, and nurtured and managed the growth, of their businesses and are ready for a transition in ownership. When we are privileged with a transaction assignment, we take the responsibility seriously. Our clients can rest assured that there is no other team better positioned, or more devoted, to achieve the optimal transaction outcome. Mergers & Acquisitions Leveraging comprehensive transaction experience and business acumen, BBC offers cradle to close merger and acquisition services to its private business owner and corporate clients, professionally managing the process to minimize business interruption. Senior-level professional review ensures that we understand, capture, and effectively convey the strategic rationale of an investment to a prospective acquirer, developing a competitive field of suitors to enhance value for our client. More than just a finder, BBC employs proactive analysis and resolution of potential business issues and deal obstacles, ensuring that the parties to a transaction remain informed and focused on closing the deal. Our M&A focus includes: Private Company Sales Public Company Divestitures Buyer Representation Transaction Values from $10 million to $250 million Management Buyouts Non-distressed Transactions Private Market Financings Whether to support the growth of a business or to enable ownership to take chips off the table, BBC professionals have successfully placed private issuances of debt and equity for a spectrum of industries. A thorough understanding of business opportunities and value enhancement created by the funding enables us to tenaciously advocate on behalf of our client and to achieve the best financing terms and conditions. Our expertise in private market financings includes: Acquisition Financing Senior and Subordinated Debt Raises Minority Equity Interest Preferred Equity Food & Beverage Partner at Billow Butler Robert Billow Managing Director Mr. Billow is responsible for originating and executing middle market acquisition and divestiture assignments. He has over 38 years of transaction experience through his roles as a corporate attorney and as an investment banker. He has participated in more than 200 transactions ranging in size from several million dollars to over one billion dollars with a primary focus on the Food & Beverage Industry, He has been a welcomed lecturer and panel participant before various state and local bar associations and continuing education forums and has presented talks before numerous gatherings of business analysts, lawyers, accountants and business owners.

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