UPDATE: SINGAPORE: Petra deal will boost growth - Barry Callebaut
Steinemann said the acquisition was an "excellent strategic fit"
Steinemann said the takeover of the Singapore company's cocoa ingredients assets was an "excellent strategic fit at the core of our business".
Speaking to analysts after the US$950m deal was announced, Steinemann said the acquisition would strengthen its ability to supply cocoa powder, demand for which is growing faster than for other ingredients. He also said the deal would boost Barry Callebaut's presence in Asia and Latin America.
However, concerns over the price Barry Callebaut paid for the deal and changes the company made to its mid-term earnings targets hit its shares, which were down 2% in Zurich at 16:52 CET.
The acquisition represented an EV/EBITDA multiple of 14.3x, which was seen as pricey in some quarters.
"It looks like an expensive deal at 15x EBITDA trailing year and it could actually be closer to 20x EBITDA this year for what is a mainly a commodity type business," Kepler Capital Markets analyst Jon Cox told just-food. "Investors with a shorter time horizon might be disappointed."
However, Cox recognised the possible benefits of the deal to Barry Callebaut. "From a long term strategic perspective it probabaly makes sense given the capacity and Asian focus of Petra," he added.
The acquisition, which is expected to close next summer, will make Barry Callebaut the world's "largest processor of cocoa and high-quality cocoa powder", Steinemann said.
The deal will boost Barry Callebaut's sales volumes in Asia and Latin America by almost two-thirds. Those regions would now account for 31% of Barry Callebaut's two volumes. It includes seven plants in Asia and Europe and sales offices in Singapore, the Netherlands and the US.
Steinemann outlined what he saw as the benefits of the deal. "It supports our further chocolate growth by adding know-how and capability especially in Asia and Latin America, boosting our sales volumes in fast-growing emerging markets. Barry Callebaut becomes a proactive player in fast-growing cocoa-powder markets. Growth is driven broadly by a lot of applications."
Barry Callebaut supplies cocoa and chocolate products to the world's largest confectioners, including Nestle and Mondelez International. Steinemann said the takeover of Petra Foods' cocoa ingredients business would reinforce those deals.
"The acquisition will strengthen Barry Callebaut's future and current outsourcing and partnership agreements as there is a trend towards combined use of cocoa and chocolate products," he said.
"It strengthens and diversifies our cocoa sourcing activities. We are adding Asia as a strong sourcing base and therefore not only guarantee more volume and quality but also more risk mitigation."
The deal has led Barry Callebaut to alter its mid-term forecasts for earnings. It said its profitability will be affected by taking on the lower-margin Petra Foods business.
However, CFO Victor Balli said the company's EBIT per tonne would return to "pre-acquisition levels" by 2015/16. He pointed to the "synergy potential" of the deal.
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