The recent appetite for M&A in the food industry is showing little sign of abating.
After the speculation surrounding Pringles, Yoplait and United Biscuits, Unilever was firmly in the M&A spotlight last week with its admission that two food brands in the UK, Chicken Tonight and Ragu, could soon be up for sale.
The news that the cooking sauces might soon be on the block added fuel to some commentators’ belief that Unilever is focusing less on food and more on its home and personal-care business. After all, in July, Unilever offloaded its Findus Italy frozen-food unit and the company is still awaiting regulatory clearance for its EUR1.28bn (US$1.75bn) acquisition of Sara Lee’s global body-care and European detergents operations. Moreover, Unilever last week agreed to buy the owner of shampoo brands Tresemme and VO5. The consumer goods giant is undergoing a makeover, right?
Well, not quite. To borrow a favourite phrase of Unilever chief executive Paul Polman, the company is still “weeding and feeding” its food business. Last week also saw Unilever again bolster its ice-cream business with a deal to buy a slew of brands in Greece, an acquisition that will give the business market leadership in the European country.
Unilever, the world’s largest ice-cream maker, clearly sees the sector as an attractive one and, meanwhile, Polman is donning his gardening gloves to give the company a better mix of international food brands and faster-growing businesses in emerging markets – like Baltimore, the Russian sauce maker it snapped up last year.
For all of Unilever’s moves in home and personal care, the company’s recent actions suggest it remains aware of the potential of its food business and is weeding out the parts that can no longer provide the growth it needs – while planting seeds for future expansion.
Last week also saw the private-equity owner of New Zealand poultry giant Tegel Foods admit it was mulling the future of the business. The last seven days also saw the further consolidation of the European dairy sector move a step closer with the farmer-members of Austria’s largest dairy Berglandmilch approving plans to merge with local rival Tirol Milch.
We also reported on discussions between olive-oil makers SOS Corporacion Alimentaria and Sovena. Speculation on the Iberian Peninsula claimed Portugal’s Sovena was studying whether to become a major shareholder in the Spanish firm, which last week launched a share issue to pay down debt and expand the business.
And, this morning (4 October), Premier Foods plc, the UK’s largest food maker, itself facing pressure to bolster its balance sheet, admitted it had received approaches for its meat-free business, which includes the Quorn brand.
Of course, all of these confirmed or potential transactions have very individual dynamics driving them but, broadly speaking, after two years of relative inaction in the M&A market, the sector could be set to see a flurry of deals. There are several trade buyers out there with strong balance sheets that could be looking to acquisitions to expand their business – especially in an economic environment where organic growth is so elusive. Meanwhile, private-equity players that have been forced to sit on their assets during the downturn are keen to yield some return for their investors – the speculation over not just Tegel but also Yoplait and United Biscuits is evidence of that.
That’s not to say that each and every rumoured deal will happen. Couche-Tard’s decision to throw in the towel on its six-month pursuit of US convenience retail rival Casey’s General Stores proves that, every so often, M&A ambitions remain unfulfilled.