Blog: Dean BestConAgra adds some spice to pedestrian year for M&A

Dean Best | 27 November 2012

Talking to a just-food reporter over coffee in London this morning (27 November), I remarked that, relatively speaking, 2012 had seemed a quiet year for M&A in the global food industry, with few knock-out, mega-deals. Four hours later, an announcement emerged in the US.

ConAgra Foods said it had struck a deal to buy US private-label rival Ralcorp Holdings. The acquisition will be one of only a handful of major deals in the sector this year (at least at the time of writing).

This year, Kellogg bought Pringles, an acquisition significant in its global impact and in that it gave the cereal giant a new category. Nestle's acquisition of Pfizer's infant nutrition business was another deal with consequences in a number of markets worldwide (indeed, the Swiss food giant is facing anti-trust obstacles in markets from Mexico to Australia). But when looking at major pieces of M&A, that is about it.

There have, of course, been a series of other notable deals. There has been consolidation in the UK dairy sector. Japan's Mizkan, US firm Hain Celestial and German group Zertus have all made acquistions in the UK. And Bright Food's purchase of a majority stake in UK-based cereal business Weetabix made international headlines, if not for the international reach of the brand but for the news that a Chinese food group had bought a household brand in a Western market.

Norway's Orkla acquired local rival Rieber & Søn to build a business that spanned Scandinavia and eastern Europe. Campbell Soup Co. diversified and acquired chilled food and juice firm Bolthouse, while General Mills added to its emerging market presence with the purchase of Brazil's Yoki. 

However, ConAgra's proposed deal to buy Ralcorp (which values the private-label firm at $6.8bn, including debt) is, alongside the Kellogg/Pringles and Nestle/Pfizer deals, one of the few truly significant transactions this year.

It will lead to ConAgra becoming the largest private-label food manufacturer in North America. It will bolster its presence in the US own-label sector, which accounts for a far smaller proportion of packaged food sales than in neighbouring Canada or in European markets and is seen is having strong potential for growth.

The US private-label sector is also a fragmented one. ConAgra and Ralcorp have both made a series of acquisitions this year (following Ralcorp's rebuttal of takeover interest from ConAgra a year ago) and the deal will give ConAgra a position of strength in the sector.

ConAgra CEO Gary Rodkin certainly thinks so and analysts on Wall Street broadly welcomed the deal.

Our coverage so far is here and tomorrow we will publish more interviews, comment and analysis on the deal, which a few weeks from the end of 2012, has added some spice to a relatively pedestrian year for M&A.


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