Food & Beverage Industry Mergers & acquisitions Q1 2016
2016 has started at a modest pace with the level of corporate activity in the first quarter subdued compared to the last quarter of 2015.
An emerging feature of the first quarter is the number of joint ventures and strategic partnerships concluded in the industry. This strategy is being driven by increased specialisation in the industry with food businesses focusing on either the manufacturing function or the sales, marketing and distribution functions. We expect this trend to specialisation to continue in 2016 as businesses seek to focus on and leverage their core competencies.
The capital markets were also relatively quiet with two companies, Mareterram and The Food Revolution Group, listing on the ASX via reverse takeovers. Prospective listings for the remainder of 2016 include Tegel Foods, the poultry producer, that is working towards a listing in May 2016.
Our overall view is that overall food and beverage businesses are trading well in 2016. Consumer demand is still strong and the relative stability of the Australian dollar bodes well for businesses with an import focus. We have seen an increased effort to enter export markets with businesses taking advantage of the favourable attitude towards Australian products especially in Asian markets.
|Date||Target Name||Acquirer||Sector||Deal Value|
|13 Jan 16||Koko Black||Simon Crowe||Confectionery||undisclosed|
|18 Jan 16||Cleanskin Coffee Co||Schibello Caffé||Coffee roaster||undisclosed|
|18 Jan 16||Artecaffe Coffee Roasters||Schibello Caffé||Coffee roaster||undisclosed|
|27 Jan 16||Pizza Sprint||Domino’s Pizza||QSR||A$52 million|
|2 Feb 16||Joey’s Pizza||Domino’s Pizza||QSR||A$121 million|
|2 Feb 16||Certain assets of Focus Fisheries||Mareterram Ltd||Seafood||A$1.2 million|
|14 Feb 16||Perth wholesale fruit & veg market (9%)||Rural Funds Group||Fresh fruit & veg||A$5.3 million|
|18 Feb 16||Nichols Poultry (option to acquire)||Tasfoods||Poultry||A$12.6 million|
A total of eight acquisitions were announced during the first quarter of 2016. No new deals were announced in the dairy sector which is surprising given the high level of corporate activity in this sector during 2015.
The acquisitions announced in the first quarter are, with the exception of Domino’s Pizza, at the smaller end of the market. We are aware of a number of transactions that are currently in the pipeline and we expect a robust second quarter of 2016 to make up for the sedate start to the year.
Joint ventures announced
With an increased focus on distribution channels and the export market, a number of businesses announced joint ventures and strategic relationship during the first quarter of 2016. The underlying strategy of these announcements are the pooling of resources to benefit the joint interests of the parties:
- Blackmores and Bega Chees entered into a partnership to distribute infant formula destined mainly of the Chinese market.
- Capilano and New Zealand honey producer, Comvita, announced a 50:50 business venture to expand Manuka honey operations.
- Costa Group and Driscoll’s announced a joint venture to grow berries for the Asian market. The joint venture is owned 70% by Costa Group and 30% by Driscoll’s and the product will be marketed in China by Driscoll’s.
- Beston Global Food Company and the Washed Rind Group entered into a strategic alliance for the distribution of cheese produced by Beston Pure Foods.
- The Food Revolution Group established four strategic relationships with retailers and distributors in China for the export of product to China.
|Date||Entity name||Capital raised||Issue price||Price 31/3/16|
|6 Jan 16||Mareterram||A$18 million||$0.20||$0.325|
|12 Feb 16||The Food Revolution Group||A$12 million||$0.10||$0.26|
There were no new front door listings of food and beverage businesses on the ASX during the first quarter of 2016. Two companies performed reverse takeovers to get backdoor listings on the ASX.
The shares in Mareterram (formerly Style Limited) commenced trading on the ASX on 6 January 2016. Mareterram acquired the food services division of the Craig Mostyn group and NorWest Seafoods in 2015. Seaharvest, one of the largest vertically integrated fishing companies in South Africa was introduced as a 19.9% shareholder as part of Mareterram’s listing on the ASX. Seaharvest is a key supplier of hake products to Mareterram. On 8 April 2016 Seaharvest announced an offer to acquire control of Mareterram.
The Food Revolution Group completed a reverse takeover of Crest Minerals and shares in The Food Revolution Group commenced trading on 12 February 2016. The Food Revolution Group owns Langtech International, a food processing company located in Victoria and New Zealand. The business manufactures fruit juices, fibers and infused fruits. The product is distributed under a number of brands including Juice Lab, which is ranged across corporate retailers.
The Food Revolution Group has a strong focus on the export market and recently announced four strategic relationships with retailers that have direct channel access in China.
Prospective listings on the ASX
|Proposed IPO Date||Entity name||Capital to be raised||Sector|
|Not available||Abundant Produce||A$3.5 million||Fresh fruit & veg|
|Not available||Sugar Dragon||A$3.2 million||Confectionery|
|Not available||China Dairy Corporation||A$20 million||Dairy|
Tegel Foods, the New Zealand based poultry producer, is considering a listing on the ASX. Tegel Foods was acquired by Affinity Equity Partners from Pacific Equity Partners for NZ$605 million (A$463 million) in January 2011. As part of the proposed IPO on the ASX, the two lead managers have valued the Tegel business in range from NZ$628 million to NZ$790 million.
Bidvest Group, the international investment holding company of Bidvest Australia, has indicated that it intends to list Bidvest Foodservice on the South African stock exchange during 2016. Bidvest Foodservice is the owner of Bidvest Australia, the market leader in the $16 billion wholesale foodservice distribution sector.