Norwegian group Orkla has sold a minority stake in its Orkla Foods Ingredients (OFI) unit to a global private-equity firm for an enterprise value of Nkr15.5bn ($1.4bn).
OFI will now be 40% owned by Rhône – the PE firm that has coffee giant Illy in its portfolio, as well as business-to-business bakery Baker & Baker.
The Norway-based company denied that it had started a sales process for its ingredients division last year.
OFI was established by Orkla in 1999 and recently reported Nkr18.1bn in sales for the 12 months ended 30 September 2023 and adjusted EBIT of Nkr1.1bn.
The food-ingredients unit spans a range of categories from bakery, pastry and ice-cream ingredients to plant-based dairy alternatives for consumers. It is present in 23 countries with over 4,000 employees.
The business is organised in three clusters: ingredients make up 63% of OFI’s operating revenue, sweet ingredients 21% and plant-based around 17%.
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Orkla said in a statement: “By closing of the transaction, OFI will replace existing financing from Orkla with an Nkr6.4bn committed bank facility (not to be fully drawn at closing) with no recourse to Orkla ASA, containing net debt to EBITDA and interest cover covenants.”
The group added: “Inclusive of other adjustment items, the equity value of OFI on a 100% basis is circa Nkr6.5bn. Rhône will have the option, exercisable through 31 March 2027, to acquire an additional 9% of OFI equity at the same price per share as the transaction announced today.”
Orkla and Rhône will both have representatives on OFI’s board of directors, which will be led by Orkla executive vice president Øyvind Torpp. Johan Clarin will continue as CEO and manage OFI.
Nils Selte, Orkla’s group president and CEO said: “The partnership search for OFI attracted strong interest. I am proud that we are joining forces with a best-in-class organisation in Rhône. The Rhône team’s partnership commitment and strategic attributes clearly stood out.
“This is a landmark deal for Orkla that puts OFI in a position to continue its organic and structural growth journey. This transaction is an example of the flexibility and value-creation ambition that we have sought to create with Orkla’s new operating model.”
Orkla spun off its businesses into 12 individual units last year, opening the door for M&A and divestments at the Nordic food group.
“Rhône is pleased to partner with Orkla in this next phase of OFI’s growth. OFI is a market leader across many European countries and in North America, where its differentiated regional and local approach to its customer base is value enhancing,” Patrick Mundt, managing director at Rhône, said.
The transaction is expected to be completed by the end of the first quarter of 2024, subject to customary conditions to closing, including approvals from relevant authorities.
“This transaction is testament to the success, strength and resilience of OFI built over many years. I am very proud that a firm of Rhône’s calibre has decided to invest in OFI and partner with Orkla,” Clarin added.
Orkla also revealed its group third-quarter results today (26 October). Operating revenues increased by 14% to Nkr16.8bn, while adjusted EBIT rose 16% to Nkr1.8bn.
Eight of the 12 portfolio companies reported underlying profit growth, including OFI.
However, OFI’s volumes declined by 1.1% in the third quarter, chiefly in the bakery and ice-cream segments. Generally, the unit’s growth was lower than in earlier quarters of this year.
Orkla also announced today that the CEO of Orkla Foods Europe Paul Jordahl will step down as of the beginning of November. Atle Vidar Nagel Johansen will take up the role temporarily.
Nagel Johansen has been a member of Orkla ASA’s management team since 2012 and is currently EVP and investment executive.