For merger and acquisition activity, 2014 was a tough act to follow. Deal-making in the food and beverage industry set a new record in 2014, hitting 510. Despite being 18 percent lower, 410 transactions made last year was one of the busiest years for buying and selling food & beverage companies, according to records compiled by The Food Institute.
The number of food industry mergers may be down in 2015, but Mergermarket estimates the value of deals in the food segment reached a near-record high of $120.8 billion, jumping 57.8 percent from even that record prior year. What is causing this gap between transactions and value? Megadeals. Megadeals are becoming more popular as companies find the only way to keep their share of the market is to merge with the competition.
And 2015 saw its share of megadeals. The poster child was the merger of Kraft Foods and H.J. Heinz Co. The transaction created the third largest food and beverage company in North America (by some accounts, although not Food Processing's) and the fifth largest food & beverage company in the world, according to the companies. The Kraft Heinz Co., which has estimated revenues of about $28 billion, is now public again and co-headquartered in Pittsburgh and a Chicago suburb.
Other notable acquisitions in the sector included J.M. Smucker Co.’s acquisition of Big Heart Pet Brands for approximately $5.8 billion, Snyder's-Lance Inc.’s purchase of Diamond Foods Inc., Post Holdings Inc.’s deal for MOM Brands Co. and TreeHouse Foods’ acquisition of ConAgra Foods' private label operations.
In the bakery category, Flowers Foods and Hearthside Food Solutions were the most active companies, each with two acquisitions. The largest deal was Flowers’ acquisition of organic bread maker Dave's Killer Bread for approximately $275 million in cash. In confectionery, Hershey Co. bought jerky-maker Krave Pure Foods Inc., and Barry Callebaut Group purchased the assets of American Almond Products Co. Inc., a producer of artisanal nut-based ingredients.
One of the larger deals in the fruit & vegetable category was Del Monte Foods’ acquisition of Sager Creek Vegetable Co. (formerly known as Allens Inc.) for $75 million. In meats, the big deal was JBS USA Pork’s acquisition of Cargill's U.S. pork business for about $1.4 billion. In poultry, Perdue Farms bought Natural Food Holdings from LNK Partners, including the Niman Ranch and Prairie Grove brands.
In the Food Institute's "other" category, McCormick & Co. made three acquisitions, buying One World Foods for approximately $100 million, Brand Aromatics for $63 million, and Drogheria & Alimentari for approximately $97 million. Seafood processors were noticeably more active in 2015 than in previous years, taking part in almost as many deals in 2015 as in the previous five years combined, but all of them relatively small.
The Food Institute (www.foodinstitute.com), a nonprofit organization founded to collect and disseminate information about the industry, includes in its definition of the food industry a number of entities beyond food and beverage processors.