2007 Top 100: Acquisitions Perk Up

In 2006, mergers and acquisitions in the food industry increased 7.7 percent, reports the Food Institute, Elmwood Park, N.J.

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In all, 348 were completed and an additional 102 were announced but not completed by the end of the year. While that's an increase over the previous year, which was a five-year low, the activity remains 13.6 percent below the total of five years ago.

The Food Institute defines "food industry" broadly, including restaurants, packaging and ingredient suppliers, retailers, wholesalers and distributors. Even so, among the strict food processors, there were 99 business combinations in 2006, up from 94 the prior year.

In its annual Food Business Mergers and Acquisitions report, the institute acknowledges a 50 percent increase in interest from investment firms and banks, which accounted for nearly one-fifth of the transactions during the year. "This is the highest number of transactions since the Food Institute began tracking Investment Firms and Banks as a separate category in 1998," the report notes.

Among the sub-categories listed under food processors, meat processors completed 13 acquisitions, up from five in 2005 -- the highest increase among food processors in terms of number of transactions compared to the previous year.

"As obesity and other health issues remain at the forefront, one emerging trend seems to be that of large food and beverage manufacturers acquiring smaller-scale producers of good-for-you products, in addition to making their own products healthier," the report states. "For example, PepsiCo Inc. [acquired] Izze Beverage Co., maker of all-natural, sparkling fruit juices, and Naked Juice Co., as well as Stacy's Pita Chip Co., an all-natural snack maker, [and] Ardea Beverage Co., maker of airforce Nutrisoda."

In the "other" category of Institutional and Vending Foodservice, the report notes "one of the most significant acquisitions in the [broader] food industry" when Aramark Corp. agreed to be acquired by an investor group led by Joseph Neubauer, chairman/CEO of Aramark, and several investment funds.

Some of the bigger buys tracked by the Food Institute:

  • Nestle SA bought Jenny Craig for $600 million and later Novartis' medical nutrition business for $2.5 billion.
  • New York-based Charter Baking Co., just created in 2005 by private equity firm Charterhouse Group Inc., bought two more companies in 2006: Superior Bakery, North Grosvenordale, Conn., and Matthew's Bread Co. The previous year, Charter Baking got under way by acquiring Vermont Bread Co., Adams Baking Corp., and Rudi's Organic Bakery. Charter is believed to be a consolidator.
  • Kraft sold off its Stella D'Oro cookie and cracker business to a subsidiary of Brynwood Partners.
  • Del Monte continued to build its pet food business by acquiring the Milk-Bone brand from Kraft and Meow Mix Holdings from investment group Cypress Group.
  • Hain Celestial bought three entities: Haldane Foods, a U.K. vegetarian business owned by Archer Daniels Midland; the Linda McCartney meat-free business from H.J. Heinz; as well as Heinz's UK fresh prepared foods business.
  • Spain's Ebro Puleva Group, already the owner of rice company Riviana Foods, got Kraft's Minute Rice brand. It also became the world's second largest pasta manufacturer with the acquisition of New World Pasta, Harrisburg, Pa.

The 214-page report can be purchased from the Food Institute web site (www.foodinstitute.com/manda.cfm) or by calling 201-791-5570 ext. 216.

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