Sixteen potential deals described as "active"

Sixteen potential deals described as "active"

Canada's Premium Brands Holdings, the acquisitive food manufacturer that has built its business on M&A, has its eyes on securing at least another 20 deals.

However, any further closing of pipeline transactions, with five in the "advanced" stage, have been suspended for the time being due to Covid-19, according to a slide presentation at Premium Brands' annual general meeting held last Friday (8 May).

Those five deals correspond to an additional CAD302m (US$215.3m) in sales. Meanwhile, another 16 potential M&A transactions are on the table, described by Premium Brands as being "active", with potential sales totalling CAD1.9bn.

Vancouver-based Premium Brands business is focused on cured meats, meat snacks, proteins, sandwiches and seafood supplied to customers in Canada and the US. The same presentation noted how the company completed 62 acquisitions from 2005 to 2020 valued at CAD1.8bn.

The most-recent transactions, with only two in the food space so far this year, included its first foray outside of North America with a 16.7% stake in La Felinese Salumi, a dry-cured meat producer based in the Italian province of Parma. The other was Bavarian Meats, which makes branded meat snacks and deli meats for the US Pacific Northwest. 

Chief executive George Paleologou spoke about the M&A pipeline in a letter to shareholders. "Going forward, out of an abundance of caution we are delaying certain capital projects and working with a number of potential acquisition partners to postpone the completion of transactions until there is better clarity on the long-term consequences of the Covid-19 pandemic," he said.

"Our long-term growth strategies have not, however, changed and we continue to nurse a full pipeline of acquisition opportunities."

Earlier this week, Premium Brands pulled its financial guidance for the year due to the unknown "ramifications" from Covid-19 as the company reported first-quarter results to 28 March. 

While sales at the retail level were supported by more people eating at home, Premium Brands saw a "relatively small" impact on its foodservice operations amid government-imposed closures. That impact amounted to CAD6.6m in sales, compared to CAD935m for the group during the quarter.

Top-line sales recorded growth of 20.4% and 14.6% in organic terms, which would have been "still a very strong 13.8%" when normalised for the effects of Covid-19, finance chief Will Kalutycz told analysts on a follow-on earnings call.

Turning back to the M&A agenda, Premium Brands has a further 25 deals that it says are in the "early stages" with the sales potential valued at CAD3.3bn, and another eight it views as an "opportunity" and a sales valuation of CAD3.5bn, according to the slide presentation.

And Premium Brands has put a new target in place to achieve sales of CAD6bn, starting this year through 2023, from around CAD3.6bn in 2019. It expects to grow sales organically to the tune of CAD1.3bn, and estimates a CAD947m contribution from acquisitions over the four years.