Food & drink firms face more foreign takeovers
Firms in confectionery and beverage were expected to be a particular focus of attention as consolidation in these sectors continued.
The news follows German yogurt maker Müller’s £279M bid for Robert Wiseman Dairies earlier this month, together with two acquisitions by confectioner Tangerine.
While a much smaller deal than Müller’s, Tangerine – owned by US private equity group Blackstone – acquired the York Fruits and Smith Kendon Travel Sweets brands, for an undisclosed sum. York Fruits and Smith Kendon have combined retail sales of about £3M.
Global expansion
Trefor Griffiths, head of food and beverage at accountancy firm Grant Thornton, told FoodManufacture.co.uk that Tangerine was now in a strong position for global expansion while maintaining its presence in the UK market. The Tangerine deals were a sign of things to come this year, he predicted.
“Expect further consolidation in 2012,” said Griffiths. “Factors such as supermarkets reducing prices will drive the need for efficiencies in the sector, and there will be significant opportunities for firms to consolidate – especially with firms that have the mandate to grow their businesses.”
But, the very competitive nature of the UK food supply chain, which is forcing up operational efficiencies, is a partial reason for the attractiveness of UK manufacturers to potential overseas companies, said Griffiths.
“Consumer spending in emerging economies will drive a demand to acquire the high technological hygiene and distribution skills that have been built by UK food and beverage businesses, making UK firms attractive targets for overseas buyers,” he added.
M&A activity
Experts at corporate finance specialist Livingstone Partners and legal firm Eversheds also predicted further M&A activity this year.
Analyst Harsha Wickremasinghe from Livingstone Partners, predicted that consolidation would be greatest among small and medium-sized food and drink firms.
Eversheds’ food sector group head Robin Skelton said: “The economy continues to be difficult, and firms without strong resources will struggle in the sector. It is these smaller firms that could be the target for larger businesses, since larger firms have the financial resources to consolidate.”
However, even after the completion of several big deals last year in the chilled own-label sector, such as 2 Sisters owner Ranjit Boparan’s acquisition of Northern Foods and Greencore’s of Uniq, the analysts did not rule out further big deals this year.
Last year, the most active sectors for M&A were: meat, fish and poultry, with 24 deals and dry goods with 21 deals.
