USA: M & A activity in 2002 lowest since early 1990s - Food Institute
Merger and acquisition activity in the food industry plunged in 2002 from the prior year and hit the third lowest mark of total transactions in the past 20 years, according to the Food Institute.
The group tracked 416 transactions in 2002, down 19% – or 100 fewer – than in 2001.
“Looking at the past two decades, only the recession era of the early nineties saw such few transactions,” observed Catherine Pfister, an industry analyst at the Elmwood Park, NJ-based Food Institute. In 1990 and 1991, 415 and 365 deals were closed, respectively.
One bright spot – investment firms and banks, who gobbled up 42 food-related concerns, twice as many as in 2001 and the highest level of deals recorded since the Food Institute began monitoring that category in 1998.
“With the economy still weak, this sector had one advantage that other categories may not have had – access to capital to finance the deals,” noted Pfister. Among the most notable in this sector and arguably the most closely watched deal of the year (rivalling the defunct attempt to sell Hershey Foods) was the agreement by a consortium led by private equity investor Texas Pacific Group to purchase fastfood chain Burger King from UK-based Diageo.
With a US$2.26bn in cash offer, the group emerged as the victor in a heated bidding war. However, in the wake of what has been deemed a debilitating price war among US burger chains, a $1.5bn deal was finally agreed to between the UK liquor giant and the consortium.
Food retailers made just 26 purchases of other companies, down 42% from 2001 and a 51% decline from 2000. The year brought no closure to the Kings Super Markets sale, however. In December, a $160m deal for the disposal of Marks and Spencer’s Parsippany, NJ-based chain collapsed after a period of exclusive talks with D’Agostino Supermarkets, Larchmont, NY, expired without the sale being finalised. Some three years after putting the chain on the block, UK-based Marks and Spencer is still seeking a buyer.
The late 1990s were boon years for merger and acquisition activity amongst restaurant and foodservice operators. Between 1996 and 1999, the category logged in more than 100 transactions annually, peaking at 140 in 1998. However, activity has been cooling in the sector since the millennium mark. This year, the category made a paltry 48 transactions – the quietest year since 1991 when 33 mergers and acquisitions were completed.
Similarly, food processors have been scaling back on consolidation in the past few years after going on a buying spree throughout much of the late 1990s. With 101 deals under its belt in 2002, the food processor category accounted for 24% of the all food industry mergers and acquisitions made last year. It was the lowest level for the category since 1995 and 1996 when 96 deals occurred each year.
To view a recent just-food.com feature on merger and acquisition activity, click here.
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