Mergers & Acquisitions 2007

The upward pace of mergers & acquisitions in the food industry continued in 2007, with a total of 413 transactions completed during the year and an additional 60 agreed upon, but not yet closed by the end of the year, according to Elmwood Park, N.J.-based The Food Institute, which has been tracking food business mergers & acquisitions for over 25 years. This compares to the 392 deals that were completed in 2006, along with the 59 that were under agreement at the end of that year. Food processors again led the way, with 94 deals closed and another 16 in development, although the total number of transactions in this category fell 14.5 percent from 2006. Investment firms and banks were the second most active group, acquiring 89 food companies. Retailers were also aggressive, with 79 transactions, as were restaurants with 57 deals completed. Among the 27 classifications of companies tracked by the Food Institute, 12 experienced an increase in merger activity, while 11 saw a decrease and four remained at the same level as the year before. Notable increases in merger & acquisition activity were seen in the Snack Food, Dairy, Investment Firms & Banks, Restaurants and Convenience Store sectors, while decreases occurred in the Bakers, Meat Processors, Seafood Processors and Multi-Product Processors categories. “Food processors have accounted for the highest number of mergers & acquisitions in the food industry for several years running; however, investment firms & banks have steadily increased their interest in food businesses and are on pace to complete more acquisitions in this industry than food processors within the next few years,” notes Danielle Breuel, research & education director. Investment firms increased their purchases 20.3 percent in 2007, as they scooped up companies in several categories, but mostly targeted restaurants. Some 44 percent of the transactions carried out by investment firms in 2007 involved a restaurant company or assets. Although the number of acquisitions by food processors decreased in 2007, the individual transactions were significant. “One thing to be said about the deals being carried out in the food processing and beverage sectors is that these acquisitions have a very specific strategic focus: larger CPG firms are purchasing smaller, health-focused companies and brands, namely Coca-Cola Co.’s purchase of glacéau and Fuze beverages, PepsiCo’s purchase of Naked Juice, and Kellogg’s purchase of Bear Naked granola,” says Breuel. Among retailers, too, some of the individual transactions were significant, such as A&P’s acquisition of Pathmark Stores Inc., and Whole Foods Market Inc.’s acquisition of Wild Oats Markets Inc. In the Other Retailers category, which includes dollar stores and drug stores, several mergers and acquisitions were major transactions that changed their industries. For example, only eight transactions were completed in 2007 in this sector, but they included such noteworthy deals as Rite Aid Corp.’s acquisition of 1,854 Brooks and Eckerd stores from The Jean Coutu Group (PJC) Inc.; the CVS Corporation and Caremark Rx Inc. merger; and the acquisition of Dollar General Corp. by affiliates of Kohlberg Kravis & Roberts & Co. L.P., GS Capital Partners, an affiliate of Goldman Sachs, Citi Private Equity, and other equity co-investors. In the Convenience Store sector, activity also surged, with 44 mergers and acquisitions being completed in 2007, representing a 22.2 percent increase from 2006. But the real retail story is that the sharp jump in merger activity that began in 2006 was spun to an even higher level last year. Retailers completed 79 acquisitions in 2007, a nearly 15 percent increase from the 69 transactions carried out during 2006. However, M&A activity in this sector in 2006 had been up substantially from previous years - just 24 deals closed in 2005 and only 33 were completed in each of the previous two years. Food Business Mergers & Acquisitions 2007