Mergers and Acquisitions Report 2012: Despite Uncertain Times, Asset Swapping Continues

The Food Institute recorded 316 food industry mergers in 2012.

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Brewers, Distillers, Wineries experienced an average year in merger and acquisition activity. Anheuser-Busch InBev was involved in two deals. Its completed acquisition of Premium Beers gave the company a 33-acre warehouse and distribution center in Oklahoma City, while its proposed purchase of Grupo Modelo, which possesses a greater than 50 percent market share Mexico, was challenged Jan. 31, 2013 by the U.S. Department of Justice in a civil antitrust lawsuit.

Mergers and acquisitions among confectioners in the past year was in line with previous years. The most significant deal in 2012 was the merger of Farley's & Sathers Candy Co. and Ferrara Pan Candy Co., creating the Ferrara Candy Co. Farley's & Sathers has purchased numerous candy brands over the past decade including Brach's Confections, RainBlo and Fruit Stripe gum, and Now and Later candies, while Ferrara Pan produces the Atomic Fireballs and Lemonhead brands of candy. Catterton Partners, the private equity firm that owns Farley's & Sathers, will remain as a majority investor in the combined company.

The dairy category was involved in 133 percent more mergers and acquisitions in 2012 than in 2011, and recorded the most in that category since 2009. Most of the deals represented a larger company purchasing assets of a smaller one, for example the California Dairies Inc. purchase of Security Milk Producers Assn., a milk cooperative that produces around 1.3 billion lbs. of milk a year and with sales of around $300 million. Consolidation continues to be a prime motivator in dairy industry mergers and acquisitions, and the Land O'Lakes cooperative purchase of the chilled dairy desserts company Kozy Shack Enterprises also fits that mold.

Canadian dairy products maker Saputo Inc. purchased the Morningstar Foods division of Dean Foods Company for $1.45 billion. Morningstar Foods is a manufacturer of dairy and nondairy extended shelf-life and cultured products, including creams and creamers, ice cream mixes, whipping cream, aerosol whipped toppings, iced coffee, half and half, value-added milks, sour cream and cottage cheese. Separately, WhiteWave Foods Co., then a controlled subsidiary of Dean Foods, agreed to sell certain assets owned by the company to Morningstar Foods for $60 million.

Following a down year for fruit and vegetable processor merger activity, 2012 brought about 266 percent more acquisitions than in 2011. Tomato producer Lipman went on a veritable produce shopping spree, buying Branscomb Produce, Combs Produce and the Ace Tomato Co. packing house across the U.S. in California. Seneca Foods also signed a Memorandum of Understanding to acquire an ownership interest in Independent Foods, a Sunnyside, Wash.-based processor of canned pears, apples and cherries.

Meat processors had a very difficult year, with meteoric rises in feed costs, drought in significant portions of the country and negative media coverage of lean finely textured beef, or "pink slime." In such an environment, the industry recorded only two mergers and acquisitions, down from nine in 2011 and the fewest since 2007.

It is telling that the only deals made were for assets outside of the beef industry, such as a Bob Evans Farms subsidiary buying the Kettle Creations brand, which co-packed side dishes for Bob Evans Farms since 2009. And Hickory Foods Inc. purchased Peterbrooke Chocolatier Inc.

Among snack food processors, notable deals included the purchase of Bachman Co.'s brands and certain assets by Utz Quality Foods. Snyder's-Lance purchased Snack Factory LLC for $340 million in cash. J&J Snack Foods Corp. got Kim & Scott's Gourmet Pretzels.

The Hain Celestial Group, Melville, N.Y., purchased lifestyle brand BluePrint, a producer of raw juice based in New York City. BluePrint markets and manufactures raw, organic cold-pressed fruit and vegetable juices including BluePrintCleanse, a raw juice cleanse program designed to detoxify the body; BluePrintJuice, a line of juices; and BluePrintBar, a raw fruit and nut bar.

Investment firms were active in restaurant M&A, with the most prominent example the merger of Burger King Worldwide Inc. with a subsidiary of Justice Holdings Ltd., bringing Burger King back into public trading on the NYSE under the ticker symbol "BKW." As a result of the closing of the transaction, 3G Capital, a global investment firm and Burger King Worldwide's principal stockholder, received approximately $1.4 billion in cash and continued as the majority shareholder with an approximately 71 percent stake in the combined publicly traded company.

3G Capital would go on to make a big splash in the industry in February 2013 when, along with Warren Buffett's Berkshire Hathaway, it acquired of H.J. Heinz Co. in a $23 billion deal, plus debt.

Private equity firm Brynwood Partners VI sold portfolio company Balance Bar Co. to NBTY, a portfolio company of The Carlyle Group and manufacturer of vitamins, supplements and active nutrition products. Balance Bar, founded in 1992, was acquired by Brynwood Partners VI from Kraft Foods in 2009.

One major deal announced in 2012 that didn't close by year-end was Itochu Corp.'s acquisition of Dole Food Co.'s worldwide packaged foods and Asia fresh produce businesses for approximately $1.69 billion in cash. The buy did close this year. Dole Worldwide Packaged Foods produces canned pineapple, canned pineapple juice, fruit juice concentrate, fruit in plastic cups, jars and pouches, fruit parfaits, healthy snack foods and frozen fruit. The unit also grows, sources, ships and distributes fresh fruit and vegetables, principally in Asia. The combined revenue of these businesses totaled approximately $2.5 billion in 2011.

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