FOOD & BEVERAGE INDUSTRY – MERGERS & ACQUISITIONS QUARTER 3 2021

Welcome to the Comet Line quarterly newsletter, where we review corporate activity in the third quarter of 2021.

20 transactions were announced in the quarter. The standout transactions in the quarter are listed below:

• the acquisition by Intersnack of full control of Universal Robina Oceania by acquiring the remaining 60% of the company; and
• Lion’s acquisition of Fermentum Group, which includes the Stone & Wood craft beer brand.

We also review the 2019-20 economic data for the food and non-alcoholic beverage industry that was recently released by the Australian Bureau of Statistics. The 2019-20 economic data includes the impact of the first 4 months of the COVID-19 pandemic.

The food and beverage industry grew sales income by 4.3% in 2019-20 to $103.6 billion. Sales income delivered compound annual growth (CAGR) of 3.9% over the 3-year period to 2019-20.

The industry reported strong profitability with EBITDA increasing by 16% in 2019-20. EBITDA increased by 10.6% CAGR over the 3-year period to 2019-20.

The 2019-20 EBITDA included increased government support payments (JobKeeper, etc.), which boosted the 2019-20 performance. The 2019-20 EBITDA/sales ratio amounted to 8.3%, an increase from the 2018-19 EBITDA ratio of 7.5%. If the above average government support payments are normalised to the 2018-19 level, then EBITDA/sales ratio is recalculated as 7.9%.

The 2019-20 economic data paints a rosy picture for the food and beverage manufacturing industry. The economic data is not split between the different channels (retail, foodservice and export). The COVID-19 lockdown and trading restrictions in the last 4 months of 2019-20 negatively impacted suppliers to the foodservice channel, while suppliers to the larger retail channel on the whole benefited from the lockdown and trading restrictions. The differential impact of the restrictions on the channels are not reflected in the industry-wide economic data.

Acquisitions announced

Kilcoy Global Foods acquired Victorian beef and lamb processor, Hardwicks Meats. Post acquisition, Hardwicks will continue to trade as a separate brand and will operate as a division of Kilcoy Global Foods.

HelloFresh submitted a $125 million offer (93 cents per share) to acquire ASX-listed meal manufacturer, Youfoodz. The offer is subject to Youfoodz shareholder approval with the scheme meeting scheduled for 8 October 2021. Youfoodz listed on the ASX in December 2020 and shares were issued at $1.50 per share during the IPO.

Perfection Fresh acquired full ownership of Fruit Master Australia. Perfection Fresh obtained a shareholding in Fruit Master Australia in 2016, when the companies merged their table grape businesses. The acquisition enables Perfection Fresh to expand its presence and capability in export markets.

Nature One acquired Nepean River Dairy for $36.5 million. Nepean River Dairy sells a range of milk products including cows milk, flavoured milk and long-life milk. The manufacturing capabilities and product portfolio of Nepean River Dairy will be merged under the Nature One Dairy brand.

Germany-based Intersnack acquired full control of Universal Robina Oceania by acquiring the remaining 60% shareholding. Universal Robina Oceania operates through Snack Brands Australia and Griffin’s Foods (New Zealand).

Far East Group, a diversified Singapore-based group, subscribed for a 20% shareholding in Comfresh Group for a consideration of $7.3 million. Comfresh is an Adelaide-based grower and distributor of fresh produce to wholesalers, retailers and supermarkets. Comfresh’s application to build three glasshouses at an estimated cost of $58.5 million was approved by the South Australian government in June 2021.

Sydney-based Foodbomb, a fresh produce wholesale marketplace, raised $4.5 million in a series A capital raise. The $4.5 million capital raised will fund Foodbomb’s existing operations in NSW and Victoria and an expansion of operations to Brisbane. The Foodbomb platform enables hospitality outlets to order fresh produce at bulk buying prices.

Ordermentum announced the sale of a minority shareholding, held by RoZetta, to a group of new investors. The selldown of the RoZetta shareholding made up the bulk of a $6 million secondary funding round for Ordermentum.

JBS Foods agreed a takeover deal with the major shareholders of Huon Aquaculture to acquire the ASX-listed salmon farmer. The deal values Huon Aquaculture at $546 million. Other participants in the sale process included Tattarang and Cooke Aquaculture. The takeover offer for Huan Aquaculture is subject to FIRB approval.

South Island Office, a Christchurch-based investor group, acquired the Sara Lee brand and business from McCain Foods. South Island Office’s first investment was Original Foods Baking Co, a manufacturer of sweet baked goods, which it acquired in 2019. The acquisition of Sara Lee may create opportunities to sell Original Foods branded product to stockists of Sara Lee product in Australia.

Fable Foods, a plant-based meat company that uses shitake mushroom stems as a base ingredient, raised $6.5 million in seed funding from investors. The funding round was led by Blackbird Ventures. The $6.5 million capital raised will be used to fund R&D and to expand manufacturing capabilities.

Fermentum Group, owner of the popular craft beer brand, Stone & Wood, was acquired by Lion. The value of the acquisition was not disclosed and media reports estimated the transaction to be valued at $300 million. Fermentum Group’s product portfolio includes Sunly Seltzer, Two Birds, Fixation and Little Dragon. As part of the transaction Lion plans to build on Fermentum’s existing Stone & Wood brand and the legacy created by the company’s founders.

ASX-listed Forbidden Foods acquired snack bar company, Blue Dinosaur for an upfront consideration of $3.2 million and an earnout consideration of $0.8 million.

Listings on the ASX
Olive Oil producer Cobram Estate listed on the ASX on 11 August 2021. Cobram Estate did not raise any capital as part of the listing process and had a market capitalisation of $780 million on 30 September 2021.