Mergers & Acquisitions in Food and Beverage

Merger

Mergers & Acquisitions in Food and Beverage

Global Consumer M&A had a strong first half to the year, with transactions valued at US$ 202.5bn topping every H1 deal value since 2008 and representing a 42.8% uptick in deal value compared to H1 2014. The increase stemmed from two domestic mega-deals, together accounting for 47.1% of total deal value: HJ Heinz’s US$ 54.5bn acquisition of Kraft within the US food sector and Cheung Kong Holdings US$40.8bn acquisition of CKH & Hutchison Whampoa within Hong Kong’s retail sector. As a result, the Consumer sub-sectors food (US$ 80.2bn) and retail (US$ 105bn) saw an increase in deal value by 129.9% and 106.9% respectively compared to H1 2014 (food worth US$ 34.9bn; retail worth US$ 50.8bn). Food deal value reached its highest H1 deal value since 2007, whilst retail reached its highest H1 deal value on Mergermarket record.

Domestic M&A jumped to US$ 143.3bn in H1, accounting for 70.8% of deal value within the sector, a sharp 133.2% increase compared to H1 2014 (US $ 61.4bn). Domestic deal activity was led by the US, with US$ 79bn worth of deals up 29.7% by value compared to the same period last year, and making up 39% of global domestic deal value within the Consumer sector. Credit for the increase is given to the previously mentioned acquisition of Kraft by HJ Heinz (US$ 54.5bn) which accounted for 69% of US domestic deal value. Meanwhile, due to appreciation of the US dollar resulting in increased borrowing costs, total cross-border transactions dropped 26.3% by value to US$ 59.2bn. US inbound M&A dropped drastically to US$407m, a 98.2% decrease compared to H1 2014. Due to a weakened Euro, Europe has been unable to keep up with rising costs, with outbound transactions into the US dropping from 23 deals worth US$ 2.6bn to only 14 deals worth US$ 49m.

Food-Industry-MA-Activity

 

TOP 10 BIGGEST DRINKS INDUSTRY ACQUISITIONS

ABInBev

Last week rumours were rife that AB InBev could be preparing a takeover bid for Diageo, a deal that would bring together the world’s biggest producers.

The rumour mill went into overdrive after a prominent columnist in Brazil claimed that the country’s richest man, billionaire Jorge Paulo Lemann, might be thinking about putting together a takeover bid for the world’s largest premium alcoholic drinks company.

While the claims have not been confirmed, and neither Diageo nor Lemann has commented on it, shares in Diageo jumped by 8% as the news broke to an 18-month high of £19.

As rumour of a Diageo takeover continue to swirl, we round up some of the drinks industry’s biggest mergers and acquisitions.

BORDEAUX ESTATES

While it isn’t a single company buying another company, the continued push by Chinese investors on Bordeaux has been significant, with dozens of Bordeaux estates snapped up since 2010.

One hundred Bordeaux châteaux are now owned by Chinese investors as interest in the French winemaking region from China continues. The 100th château, Renon in the Cadillac Côtes de Bordeaux appellation, was bought by Chinese packaging millionaire James Zhou for an undisclosed sum in January. Just a few weeks before the Renon sale, Chinese property tycoon Chen Miaolin acquired the 24-hectare 18th century Château de Birot in Cadillac Côtes de Bordeaux.

Investors have also set their sights on Burgundy, with Chinese gambling tycoon Louis Ng Chi Sing paying €8m for Château de Gevrey-Chambertin in 2012.

China, remains Bordeaux’s key export market ahead of the UK and entrepreneurs in the country have been buying up châteaux in the region since 2010 both as status symbols and to quench a domestic thirst for the wines. There are around 7,400 winemaking châteaux in Bordeaux.

BACARDI

Earlier this year Bacardi stepped into the buoyant Bourbon market for the first time, acquiring Angels Share Brands, including its Louisville Distilling Co subsidiary and Angel’s Envy brand.

The deal, which was completed for an undisclosed sum, will see Angel’s Envy continue as a standalone operation, with plans remaining in place for a new distillery and “brand experience center” to open in 2016.

Founded by the late Master Distiller Lincoln Henderson, whose son Wes Henderson remains with the company as global brand ambassador, Angel’s Envy is blended in small batches of 8-12 barrels, with the idea that each batch develops its own individual nuances.

This move by Bacardi follows predictions that sales of whisky in the US would move ahead of vodka last year for the first time since 2007, with Bourbon driving category growth.

MAJESTIC

In one the biggest acquisitions in the the UK wine trade in recent years, UK wine merchant Majestic bought crowdfunding wine retailer Naked Wines for £70 million in April, appointing its founder Rowan Gormley as Majestic’s new CEO.

Naked Wines was founded by Gormley in 2008 and allows “angels” to invest in winemakers in return for cheaper wine deals. Since its inception, Naked Wines has achieved impressive growth, with sales of £74 million to the end of 2014, up 40% on the previous year.

While both companies continue to operate as independent brands, the deal opens up opportunities for Majestic’s international growth in the USA and Australia, where Naked Wines has strong foothold. Its also presents a chance for both companies to share complementary strengths: Naked Wines’ online and e-commerce skills and Majestic’s national store network.

In its first annual statement, released yesterday, Majestic announced a drop in profits of 22.5%, which it attributed in part to the cost of acquiring Naked Wines.

CAMPARI

In April last year Gruppo Campari bought the Italian bitter, liqueur and grappa producer Fratelli Averna for €103.75 million.

The deal saw Gruppo Campari take control of the 150-year-old company’s entire portfolio, which includes the Averna, Braulio, Limoncetta and Frattina premium brands, strengthening its leadership of the Italian spirits market and marking its first foray into the grappa category.

Fratelli Averna, based in Sicily, was founded more than 150 years ago by the Averna family, and has been continuously managed by the founding family for five generations. It has a 15% share in the Italian market, but also has a growing presence in central Europe and the US.

The previous month, Campari also acquired the Forty Creek Canadian whisky distillery for €120.5m.

SABMiller

SABMiller showed it meant business when it comes to craft beer earlier this year by purchasing Greenwich-based brewer Meantime Brewing Company.

Acquired for an undisclosed sum, Meantime is the first British brewery to enter SABMiller’s portfolio, with all 60 shareholders selling 100% of their shares in the company. Under the deal, Meantime will seek to expand its reach and sell its extensive range of craft beers, led by its London Pale Ale, London Lager, Yakima Red and Pilsner, in new global markets.

The world’s second largest brewer, London-based SABMiller owns 200 local and heritage beer brands including Fosters, Grolsch and Peroni. The company is keen to bring beer to a wider range of consumers, particularly women, and also aims to flag up beer’s food matching capabilities.

Meantime was founded in a tram shed in 1999 and now makes 40 different styles of beer. Meantime’s management team, led by chief executive Nick Miller and founder Alastair Hook, will continue to run the company.

ACCOLADE

Accolade Wines completed its acquisition of Barossa’s Grant Burge Wines in February,taking control of the Grant Burge brand, Burge and Rathbone Fine Wine Merchants business and its historic Krondorf Winery.

Financial details of the deal were not revealed, however Accolade Wines’ general manager for Asia Pacific, Michael East, said the company had been the one to approach Burge, admitting it had been seeking a base in the Barossa for some time.

Grant and Helen Burge founded Grant Burge Wines in 1988, which has become known for its sparkling, premium white, red and fortified wines, and in particular its Meshach Shiraz.

Mr East said Grant Burge would play a “crucial role” as brand ambassador and continue to supply premium Barossa Valley fruit to the business.

BIBENDUM

Perhaps the largest ever merger in the UK drinks trade, last year Bibendum Wine Limited merged with drinks importer the PLB Group, along with both companies’ subsidiary trading arms; the Wondering Wine Company, Instil Drinks Company, PLB’s beer division, with Walker and Wodehouse Wines also joining the group. All five companies now operate under Bibendum PLB.

 

Considering the UK market, it was the biggest consolidation in recent memory, creating a unique distribution company catering to the on-trade, off-trade and independents across beer, spirits and wine.

At the time, Michael Saunders, chief executive of The Bibendum PLB Group, said: “Consolidation has been a widely discussed topic in the industry for several years as companies strive to grow in a low margin and complex market. By uniting the strengths of Bibendum with the strengths of PLB, and maximising the expertise within each trading company, our new group will be uniquely placed to offer customers the best possible service.”

In an interview with db Saunders stated his belief that consolidation is the way forward for the UK drinks industry, explaining that the measure was not “just about profitability”, but a strategy that would result in reducing the number of gateways into the UK market making for a “slightly tighter” industry, adding that he did not see it as a “threat” but an opportunity.

WHITE & MACKAY

One of the biggest acquisitions of the year was the sale of United Spirits’ Whyte & Mackay Scotch whisky arm to the Philippines-based drinks manufacturer, Emperador. The deal was sealed for a cool £430 million (US$726 million), and saw Emperador take over the Scotch whisky brand.

Emperador, part of Alliance Global Group, is known for its Emperador Brandy label, which tripled its growth since 2010 and is now the third largest spirit label by volume worldwide (following Jinro soju and Ruang Khao Thai spirit), according to Impact Databank. The company is controlled by billionaire Andrew Tan.

Whyte & Mackay was put up for sale by USL in February after the British Office of Fair Trading (OFT) raised concerns about Diageo’s acquisition of a controlling stake in United Spirits in November last year, citing competition concerns.

Sovereign Brands

In what was the most “bling” acquisition in recent years, US rapper Jay-Z acquired Armand de Brignac Champagne from Sovereign Brands after making the company an offer it “simply couldn’t refuse”. The details of the deal were not disclosed, but reports placed it at around US$200 million.

Armand de Brignac was first released eight years ago and has carved a niche for itself as a top-end Champagne popular in nightclubs. Jay-Z has long been a supporter of the brand, commissioning a 350-bottle tower of Armand de Brignac to serve as the centrepiece at a fundraiser for President Obama at his 40/40 nightclub in New York.

Although Jay-Z owns the Armand de Brignac brand, the Champagne and packaging is produced by Champagne Cattier, and then sold to Jay-Z’s Ace Of Spades Holdings, LLC. The contract between Cattier and Jay-Z’s company is the same as that which existed between the Champagne house and former Armand de Brignac brand owner, Sovereign Brands.

SUNTORY BEAM

By far the biggest drinks merger in recent history, Suntory Holdings’ deal to buy the US-based Beam, creating Beam Suntory Inc, saw the Japanese drinks group acquire all shares of Beam and take on its outstanding debt in a deal worth $16bn.

Its completion saw Suntory become the world’s third largest drinks group, behind Diageo and Pernod Ricard. The acquisition brought together Beam’s brands, which includes Jim Beam, Sauza Tequila and Courvoiser Cognac, with Suntory’s leading Japanese whiskies Yamazaki, Hakushu, Hibiki, and Kakubin.

Suntory was founded in 1899 and is Japan’s leading beverage company, with the newly created Beam Suntory Inc now a subsidiary of Suntory Holdings.

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Data Source: The Drinks Business | Own Editorial Staff | Mergers & Acquisitions Report