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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The Food Institute recorded 316 acquisitions in 2012 in the broader food and beverage industry, down about 17.1 percent from 2011. True food processors experienced a similar year in 2012 as they did in 2011, with 83 total mergers last year, compared with 79 in 2011. That was the third straight year of increased acquisitions after 2009's low of 58.

The Food Institute, a nonprofit organization founded to collect and disseminate information about the industry, includes in its definition of the "food industry" a number of other entities on the accompanying table, as well as brokers, consultants and other service providers, investments firms and banks, packaging and equipment suppliers, raw product and ingredient suppliers, restaurants and foodservice, retailers, and wholesalers and distributors.

The major food and beverage processors were active in 2012 and made deals that are reshaping the business. Kellogg Co. became the world's second-largest savory snacks company with the $2.7 billion purchase of Procter & Gamble's Pringles brand, which earns $1.5 billion in sales across more than 140 countries. Campbell Soup Co. acquired Bolthouse Farms for $1.55 billion in cash, a vertically integrated food and beverage company focused on high value-added natural products and in possession of significant market positions in fresh carrots, superpremium beverages and private label products in the U.S.

The largest acquisition, announced in late November, was the $6.8 billion purchase of Ralcorp Holdings by ConAgra Foods. Spurned by Ralcorp two years ago, ConAgra withdrew a $94-a-share cash offer ($5.2 billion) in September 2011, but returned to the table with a new proposal of about $4.95 billion (plus debt) for a smaller Ralcorp, after the private label firm spun off its Post Holdings business in February. The merger will reportedly create the largest private label packaged food business in North America, with approximately $4.5 billion in combined annual private label sales.

ConAgra was busy last year, having also bought the Bertolli and P.F. Chang's Home Menu frozen meals businesses from Unilever PLC for $267 million; and Odom's Tennessee Pride, a producer of frozen and refrigerated breakfast sandwiches and sausages; and also Kangaroo Brands, a maker of pita chips.

General Mills made three deals. Domestically, the Food Should Taste Good snack brand will become part of Small Planet Foods, General Mills' natural and organic products business. In Brazil, General Mills found Yoki Alimentos. In India was the spice/sauce mix business of Parampara.

B&G Foods Inc. acquired the New York Style and Old London brands from Chipita America, Inc., a subsidiary of Chipita S.A., for approximately $62.5 million in cash. The acquisition includes a manufacturing facility in Yadkinville, N.C., with approximately 250 employees.

Cargill Inc. was the winning bidder in a federal bankruptcy court auction to acquire AFA Foods' ground beef processing plant in Fort Worth, Texas. The bid includes $14.1 million for the facility plus the purchase of all working capital assets. AFA filed for Chapter 11 bankruptcy protection in April 2012.

Coca-Cola Co. and Select Milk Producers Inc. acquired equal equity stakes in the newly created Fair Oaks Farms Brands LLC to drive growth and expansion of the Core Power protein milk shake and to create a portfolio of brands and products that feature dairy. CorePower is currently distributed by Coca-Cola.

Dole Food Co. Inc. acquired Mrs. May's Naturals, a snack company focused on healthy products.

Little Crow Foods sold off some assets including brand trademarks, recipes, inventory and production. MOM Brands, the new name for Malt-O-Meal Co., got the Coco Wheats cereal line, while Gilster-Mary Lee Corp. won FastShake Pancake Mixes, Fryin' Magic and Baking Miracle Seasoned Coating Mixes.

Rich Products Corp. acquired f'real foods LLC, providing Rich Products with a new product line (milkshakes, smoothies and frozen coffee beverages) and greater penetration into the convenience store. Rich also family-owned Goglanian Bakeries, significantly expanding Rich's pizza business and provide a line of par-baked pizza crusts, flatbreads and pitas.

TreeHouse Foods Inc. acquired the aseptic cheese and pudding business of Associated Milk Producers, a dairy marketing cooperative. TreeHouse also acquired substantially all of the assets of Naturally Fresh Inc., a maker of refrigerated dressings, sauces, marinades, dips and specialty items.

Baked goods producers were involved in seven deals in 2012, three more than the previous year and the most since 2008. Flowers Foods, the marketer of the Nature's Own and Tastykake brands, added to its sizable portfolio with the acquisition of Lepage Bakeries, the maker of regional brands Country Kitchen and Barowsky's. Flowers Foods also entered into a deal with a unit of Mexico's Grupo Bimbo to get perpetual, exclusive and royalty-free licenses to the Sara Lee and Earthgrains brands for sliced breads, buns and rolls in California and the Oklahoma City market area. And in 2013, Flowers won at auction bankrupt Hostess's bread brands, including Wonder Bread.

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