Food and Beverage Recap
Second quarter 2015
C ons um ers g oi ng au naturel C ons um er dem and f or natural and org ani c f oods h as m ul ti nati onal f ood g i ants ref orm i ng th ei r b rand of f eri ng s th roug h acqui s i ti ons to s ecure a p res ence i n th i s s i z z l i ng m ark et. This quarter continued a trend that began to emerge over the last couple of years. And unlike a once-optimistic New Year’s resolution; the trend has not faded as we approach the mid-point of 2015. With the upturn of the economy and increases in disposable income, the consumer appetite for natural, organic and healthy products has never been stronger, as evidenced by an 11% compound annual growth rate increase in organic food sales in North America over the last decade.
Large industry players have picked up on this trend and are showing that acquisitions in the organic and natural food space are at the top of their shopping list, and they are prepared to pay handsomely for them. Premium valuations are being driven from the thesis of marrying growing consumer demand with the massive distribution networks of the multinationals.
Som e recent ex am p l es i ncl ude: E V / R ev ( x )
E V / E B IT D A ( x )
D ate
T arg et
B uy ers
T rans acti on C om m ents
Q2-2015
Garden Fresh
Campbell Soup
Garden Fresh manufactures organic salsa, hummus, dips and tortilla chips.
2.1X
15.2x
Q2-2015
Sequel Natural Ltd. (Vega)
WhiteWave Foods
Sequel Natural Ltd., doing business as Vega, produces and sells dietary supplement/natural health products such as protein shakes and all-in-one bars.
5.5X
22.0X
Q2-2015
Applegate Farms
Hormel Foods Corporation
Applegate Farms LLC produces natural and organic deli meat products.
2.3X
16.0X
Q1-2015
Krave Pure Foods, Inc.
The Hershey Company
Krave Pure Foods, Inc. produces and sells natural meat products.
9.0X
Q3-2014
Annie’s Inc.
General Mills
Annie’s, Inc. produces, markets, and distributes natural and organic food products.
2.1X
38.6X
Q2-2014
CytoSport, Inc.
Hormel Foods Corporation
CytoSport, Inc. manufactures sports nutritional products such as protein powder beverages, ready-to-drink beverages, bars, or capsules.
1.3X
15.7X
Q2-2014
Flagstone Foods
TreeHouse Foods Inc.
Flagstone Foods, Inc. produces and sells private label healthy snacks in North America.
1.0X
12.0X
Q1-2014
Earthbound Farms
White Wave Foods
Earthbound Farms grows organic produce. It offers salads, fruits, vegetables and frozen fruits.
1.2X
8.0X
Wm. Bolthouse Farms, Inc.
Campbell Soup
Wm. Bolthouse Farms, Inc. produces beverages, dressings, and carrots. Its beverages include healthy juices, smoothies, breakfast smoothies, and cafe drinks.
2.2X
9.5X
M ean
3.0x
17.1x
M edi an
2.1x
15.4x
Q2-2013
The appetite for acquisitions shows no signs of thawing, with EBITDA multiples in the natural and organic space reaching the double digits in the majority of transactions. The Organic Trade Association reports that approximately 84% of consumers are purchasing organic products, a trend that’s likely to continue. The pervasive trend in organic food purchases has also alerted major retailers, with Wal-Mart indicating it will increase its organic offerings by 20% in 2015, stating the company believes it’s very important to “various demographic groups, including millennials.” Discount shopping chain Costco has also seen a dramatic increase in its organic sales, now positioning it to be the largest organic retailer in North America. The growing customer sentiment toward natural and organic food products and resulting high valuations make this one of the best times to take advantage of value in the market. Large food and beverage companies will continue to seek out mid-market players in order to increase their market share in the natural and organic sector. The increased focus on this area is a pivotal moment for mid-market players to consider their strategic goals and the possibility of cashing-in on the current valuation spectrum.
of approximately 8.1 times EBITDA.
Following are brief summaries of selected transactions in the North American food and beverage industry from the second quarter of 2015:
P ack ag ed f oods • Japan-based Kagome Co., Ltd. agreed to acquire a 70% stake in Preferred Brands International, Inc. from ASG-OMNI LLC and 2x Consumer Products Growth Partners, L.P. for US$80 million. Preferred Brands International, headquartered in Stamford, CT, manufactures a range of processed ethnic foods using organically grown ingredients under the brand name Tasty Bite, selling to consumers in the United States, Canada, India and Australia.
Snack f oods
Ridley Inc. manufactures a range of animal nutrition products, including formulated feeds to consumers and breeders in the United States and Canada.
Seaf ood • Vancouver, BC-based private equity group Tricor Pacific Founders Capital Inc. agreed to acquire Presteve Foods Limited. Financial terms of the deal were not disclosed. Presteve Foods Limited, headquartered in Wheatley, ON, offers seafood products to the US and international markets through its distribution network and their retail store.
Company agreed to acquire Garden Fresh Salsa Company Inc. for approximately US$231 million. The transaction represents an enterprise value of approximately 15.2 times EBITDA. Garden Fresh Salsa Company, based in Ferndale, MI, produces various types of salsa, dips, hummus and corn tortilla chips which are sold through food retailers in the United States. Salsa represents approximately 50% of their revenue.
NRD Capital Management, LLC entered into an agreement to acquire Frisch’s Restaurants Inc. from the Frisch family and other shareholders for approximately US$173 million. This transaction represents an enterprise value of approximately 7.3 times EBITDA.
The New Bakery Company, headquartered in Zanesville, OH, produces and distributes sandwich buns.
• Vancouver, BC-based Tricor Pacific Capital, Inc. acquired a controlling stake in Gold Standard Baking, Inc. from Arbor Private Investment Company. The financial terms of the deal were not disclosed. Gold Standard Baking, based in Chicago, IL, manufactures thaw-and-serve baked goods, including croissants, butter flake rolls and signature breads. The company also offers contract baking services and serves the food service and restaurant industries.
• Dallas, TX-based Brinker International, Inc. acquired Pepper Dining, Inc. from Olympus Partners and others for approximately US$106.5 million. This transaction represents an enterprise value of approximately 3.5 times EBITDA. Pepper Dining, Inc., based in Charlotte, NC, operates Chili’s Grill & Bar restaurants in the Northeastern and mid-Atlantic region.
I ng redi ents
• Sparks, MD-based McCormick & Company,
A ni m al nutri ti on
• Nicholasville, KY–based Alltech Inc. entered into an agreement to purchase Ridley Inc. from Fairfax Financial Holdings Limited and AGF Investments Inc. for approximately CDN$521 million. The transaction represents an enterprise value 2 | Food and Beverage Recap Second quarter 2015
• Westport, CT-based private equity group
Manitoba Harvest, headquartered in Winnipeg, MB, offers hemp-based foods, including hemp hearts, heart bites, protein powder and oils, through retail and online stores in the US and Canada.
by private equity firm One Equity Partners LLC, agreed to acquire The New Bakery Company, LLC from The Wendy’s Company for approximately US$80 million.
Frisch’s Restaurants Inc. operates fullservice family-style restaurants under the Frisch’s Big Boy name in various regions of Ohio, Kentucky and Indiana.
N atural f oods
Daybrook Fisheries, Inc. headquartered in Empire, LA, produces and distributes menhaden fish meal and fish oil as a source of omega-3, proteins and essential minerals for feed formulations.
• Chicago, IL-based East Balt, Inc., owned
• Atlanta, GA-based private equity group
BSA Inc., headquartered in Montreal, QC, offers custom blended flavours, spices and herbs for meat, poultry and seafood products tailored to customer specifications.
agreed to acquire Daybrook Fisheries, Inc. for approximately US$382 million. This transaction represents an enterprise value of approximately 8.7 times EBITDA.
B ak ed g oods
R es taurants
signed a purchase agreement to acquire a 95% stake in BSA Inc. from Marcel Baril and four partners for approximately CDN$43 million. The transaction represents an enterprise value of approximately 1.2 times revenue.
Compass Diversified Holdings agreed to acquire Fresh Hemp Foods Ltd. (Manitoba Harvest) from Avrio Capital Inc., White Road Investments, Dreamweaver Productions Ltd. and Kay Four Properties Inc. for approximately CDN$132.5 million. The transaction represents an enterprise value of approximately 20.7 times EBITDA.
• South Africa-based Oceana Group Ltd.
• Camden, NJ-based Campbell Soup
• Israel-based Frutarom Industries Ltd.
• Austin, MN-based Hormel Foods Corporation acquired Applegate Farms LLC for approximately US$775 million. The transaction represents an enterprise value of approximately 16.0 times EBITDA. Applegate Farms LLC, based in Bridgewater, NJ produces natural and organic deli meat products which are sold through retail stores in the United States.
• Switzerland-based Barry Callebaut AG signed an agreement to acquire the assets of American Almond Products Company. The financial details of the transaction were not disclosed. American Almond Products Company, based in Brooklyn, NY, manufactures natural nut butters, sweetened nut pastes and related ingredients which are sold through a network of ingredient distributors.
• Omaha, NE-based ConAgra Foods Inc. acquired Blake’s All Natural Food. The financial terms of the deal were not disclosed.
Inc. signed an agreement to acquire One World Foods for approximately US$100 million. The transaction represents an enterprise value of approximately 3.3 times revenue.
Blake’s All Natural Food, based in Concord, NH, offers natural and organic food products which include chicken pie, pasta and macaroni which are sold through retail stores.
One World Foods, Inc., based in Austin, TX, is a seller of Stubb’s barbeque sauces as well as marinades, rubs and skillet sauces. It also owns a restaurant in Austin.
(continued on back page)
Data source: Capital IQ Inc., Post News Releases
E rns t & Y oung O renda f ood and b ev erag e i ndex Foodb and E nterp riErnst s e v & alYoung ue Orenda trends y s Beverage ectorIndex - Enterp Trends by Sector
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Our food and beverage index consists of the following publicly traded companies:
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Grocery & Convenience Retail
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E rns t & Y oung O renda f ood and b ev erag e i ndex E nterp ri s Ernst e v &alYoung ue trends b y andcountry Orenda Food Beverage Index - Enterp Trends by C ountry
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T i ck er s y m b ol
Tyson Foods Kraft Foods Mondelez Int., Inc. General Mills ConAgra Foods Dean Foods Campbell Soup McCormick & Co. Hormel Foods Hershey Co. Kellogg Company
TSN KRFT MDLZ GIS CAG DF CPB MKC HRL HSY K
B ev erag es The Coca-Cola Company PepsiCo Constellation Brands
KO PEP STZ
12x
G rocery and conv eni ence retai l SuperValu SVU Kroger KR Whole Foods WFM
EV/ EBITD A
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C anad ian F ood C omp anies
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E rns t & Y oung O renda f ood and b ev erag e i ndex N orth A m Ernst eri &can v ol um Index e and s i z American e Youngtrans Orendaacti Food on and Beverage - North 400
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1
Q2 15
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0
Aggregate Transaction Value ($US million)
Number of Transactions
Transaction Volume and Size
$-
Q1 2015 figure exludes Heinz's acquisition of Kraft Foods Inc. ($62B) for presentation purposes.
Number of Transactions
R es taurant and f oods erv i ce Starbucks McDonald’s Jack in the Box Inc. Yum! Brands Darden Restaurants Brinker International Dine Equity Inc.
SBUX MCD JACK YUM DRI EAT DIN
C anadi an f ood and b everage com pani es
T i ck er s y m b ol
F ood p roces s i ng Maple Leaf Foods George Weston Saputo High Liner Foods
MFI WN SAP HLF
B ev erag es Molson Coors Cott Corporation Lassonde Industries Andrew Peller Corby Spirit & Wine
TAP BCB LAS.A ADW.A CSW.A
G rocery and conv eni ence retai l Loblaw Companies L Metro Inc. MRU.A Alimentation Couche-Tard ATD.B
Aggregate Transaction Value
Note: The indices used in this newsletter have been compiled by Ernst & Young Orenda Corporate Finance Inc. solely for illustrative purposes. The companies chosen are publicly traded companies that are commonly used for industry composites to show stock performances within a sector. The indices do not include all public companies that could be categorized within each sector, and were not created as benchmarks, nor should they imply benchmarking or recommendations for a particular stock and/or sector. Charts: Ernst & Young Orenda Corporate Finance Inc. Data source: Capital IQ, Inc., Bloomberg
Food and Beverage Recap Second quarter 2015 | 3
N utri ti on • Denver, CO-based The WhiteWave Foods Company agreed to acquire Vega from private shareholders and VMG Partners for approximately US$550 million. The transaction represents an enterprise value of approximately 22.0 times EBITDA.
C anadi an F ood and B ev erag e L eader Stephen Dewis Toronto, Ontario +1 416 943 2063
[email protected]
Vega, headquartered in Burnaby, BC, produces dietary supplements and natural health products such as protein shakes, protein bars and other supplements which are sold through retail stores in the United States and Canada.
• Omaha, NE-based FitLife Brands, Inc. entered into an agreement to acquire iSatori, Inc. from RENN Capital Group, Inc. and Breakwater Investment Management, LLC for approximately US$ $7.7 million. The transaction represents an enterprise value of approximately 0.8 times revenue. iSatori, Inc., headquartered in Golden, CO, offers energy and sports drinks, nutrition bars and meal replacement proteins through online marketing and retail stores worldwide.
E Y
| Assurance | Tax | Transactions | Advisory
D i s tri b uti on
• Toronto, ON-based Sysco Canada Inc. agreed to acquire Tannis Trading, Inc. The financial terms of the deal were not disclosed. Tannis Trading, Inc. headquartered in Ottawa, ON, supplies food products to the food service industry.
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Data source: Capital IQ Inc.
