The Executive Board of Koninklijke Wessanen, the international food group, yesterday announced that it had reached an agreement with main shareholders of the French Distriborg Group to acquire 51% of Distriborg’s shares at Eur 77 per share. Wessanen intends to launch a tender offer at the same price for the remaining shares, which are quoted on the Paris “second marche” stock exchange. The total purchase price for 100% of the shares will amount to Eur 115 million. Wessanen will also assume Eur 35 million of Distriborg’s debts.
With expected sales of Eur 250 million in 2000, Distriborg is the leading European marketer of natural and specialty foods(1). Products of the group are sold to both supermarket chains and health food shops. With this acquisition, Wessanen will participate in one of the fastest growing segments of the food industry in Europe. It complements the company’s efforts to become a major global player in natural and specialty foods. Wessanen is already present in this segment through it’s subsidiary Tree of Life, the leading US player with expected sales of Eur 1.8 billion in 2000. There will be a perfect fit between the activities of Distriborg and Tree of Life because of complementary markets and combining the marketing and distribution expertise in the natural and specialty foods market.
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By GlobalDataThis acquisition will be consolidated as of August and is expected to make a modest immediate contribution to the earnings per share of Wessanen. The transaction is expected to be completed in October. Wessanen will finance this acquisition via the available credit facilities.
The growth strategy of Wessanen places priority on the expansion of natural and specialty foods activities, which form a major and attractive fast growing niche in the global food market. It firmly believes that the consumer trends towards increased attention to health and wellness and the high demand for individualized products offer tremendous added value opportunities.
Executive Board Koninklijke Wessanen nv
(1) Natural foods include health food and organic products, vitamins, supplements and herbs, while specialty foods include gourmet and ethnic foods from around the world. Background information Background information
1- Rationale
Having established through Tree of Life its national distribution network in the US, Wessanen focused on Europe as a logical next step forward considering the rapid growth of the natural and specialty foods market and the high market fragmentation in Europe.
Being the leading marketer of natural and specialty foods in Europe, Distriborg offers Wessanen the perfect platform to launch its further international expansion in this segment.
Tree of Life and Distriborg offer a perfect fit since they serve the same type of health conscious consumers in two major and complementary markets. This leads to opportunities in the following areas:
– the ability to offer a Pan-American and Pan-European distribution network of own and third party brands, – shared consumer and product knowledge, – the sharing of specific multi-branding expertise of Distriborg and – the opportunity to benefit from the logistic expertise of Tree of Life.
2- Financing
The shares of Distriborg were closely held. The current CEO, Mr R. Pelen and related parties controlled 51%. The other shares are publicly listed on the stock exchange “second marche” in Paris. Agreement has been reached to acquire 51% of the shares and an offer for the other shares will be made shortly in accordance with French stock exchange regulations at the same price of Eur 77 per share. Eur 77 per share represents a premium of about 60% compared to the closing price of the thinly traded Distriborg as of July 5. We expect to finalize the total transaction around October 2000. The increased debt as a consequence of funding this acquisition will increase the debt to equity ratio to approximately 1.4 and will have a slightly negative effect on Wessanen’s interest coverage ratio. The acquisition of Distriborg includes a goodwill amount of Eur 115 million (assuming a 100% of the company is acquired), which in accordance with Wessanen’s accounting policies will be written off against the equity account.
3- Profile of Koninklijke Wessanen nv
Koninklijke Wessanen is a Dutch based food multinational active in the United States, Europe and Asia, with Eur 3 billion in sales in 1999. 75% of sales comes from the US through its natural and specialty foods division, Tree of Life, and its dairy division, Marigold Foods, Crowley Foods and American Beverage Corporation. In Europe, the company is active in cheese, breakfast cereals and convenience foods. Its primary companies are Leerdammer Company, Dailycer and Beckers.
Wessanen’s ordinary shares are listed on the Amsterdam, London, German and Swiss stock exchanges and trade in the US in ADR form. Each ADR is equal to one ordinary share and prices may be accessed on the NASD OTC Bulletin Board under the symbol KNKWY. Prices for the ordinary shares may be accessed on Bloomberg under the symbol WESS NA.
4- Distriborg
With expected sales of Eur 250 million in 2000, Distriborg is the leading European marketing and distribution organisation of natural and specialty foods. The group has built a unique position in the French market in 30 years and more recently extended its business to the United Kingdom, Italy, Belgium, The Netherlands and Spain, through either acquisitions or green-field operations.
Distriborg sales are equally split between supermarkets and health food shops. It promotes its own brands in both channels. The Distriborg brands account for more than 50% of the total sales.
In the supermarket channel Distriborg principally sells its own brands, which are targeted at the specialised health corner. Its largest brand is Bjorg, positioned in the organic/nutrition segment. Bjorg’s dry range reached a 44% market share of the French dry organic market in 1999 and is still gaining market share. In 1999, Distriborg bought the Gayelord Hauser brand from Danone which holds the number 2 position in the dietetic market with 14% market share in 1999. Other brands such as Vivis, Equilibrance, Vendomine and Athlon complete Distriborg’s wide offer of health niche products. Distriborg has a 13% market share of the natural foods market in the supermarket channel in Italy.
Another division of the group distributes specialty foods to supermarkets in France.
In the health food shop channel Distriborg distributes third party products along with its own brands Bonneterre and Evernat. This complete product range coupled with strong trade marketing, ensures its strong position in France today. Its British subsidiary Brewhurst has a 15% market share of the health food shop segment in the United Kingdom.
The company operates from Lyon, where its headquarters and largest distribution centre are located, and from different decentralized subsidiaries. All its distribution centers are adapted to handle niche products. It has no production facilities. The company employs 800 people.
The small French retail chain in organic food, La Vie Claire, currently owned by the Distriborg Group, will not be part of the transaction and its sales are not included in the Distriborg sales number of Eur 250 million.
5- Tree of Life
Tree of Life is the largest subsidiary of Wessanen. With expected sales of Eur 1.8 billion in 2000, it is the premier marketing and distribution company for natural and specialty foods in the United States.
Tree of Life built a unique nationwide distribution network in natural and specialty foods through organic growth and acquisitions. It now operates out of 19 state-of-the-art distribution centres strategically located around the US and Canada. It employs over 6,000 people.
Tree of Life supplies both the health food shop channel and the leading supermarket chains and supplies a total of in excess of 20,000 retail outlets. Its current leading position was gained through the breadth and innovative character of its assortment with over 30,000 products and the quality and innovation of its trade marketing programmes.
Tree of Life has become the main category manager of niche innovative foods for several leading supermarket chains. It supplies them with ethnic and gourmet foods and also manages the “Natural Food” corner of some of the main American supermarket chains with its “store within a store” concept.
For further information: www.Wessanen.com www.Treeoflife.com www.Distriborg.com
