2016 was a strong year for food and beverage mergers and acquisitions, but large-scale transactions did not match those of 2015, according to a review of corporate activity by Cometline Consulting.
The M&A advisory firm also found lower mergers and acquisitions activity in the dairy sector, and higher activity in the fresh produce space. Offshore buyers, especially from Asia were also on the rise.
“2017 is shaping up to be a dynamic year across the food and beverage industry, with a number of potential M&A opportunities,” the authors David Baveystock and Ben van der Westhuizen wrote.
“Although transaction levels did not reach the heights of 2015, it was still a strong year with several high-profile transactions completed.”
There were fewer large transactions of $400 million or larger in 2016, compared to the previous year, according to Cometline Consulting, with the sale of Snack Brands Australia to Universal Robina Corporation for $600 million the only deal in this category.
In contrast, 2015 saw a number of large sales including Swisse Wellness ($1.67 billion), Goodman Fielder ($1.3 billion), Menulog ($850 million) and VIP Petfoods ($410 million).
This tallies with global trends, according to research firm Zenith, which found that out of a record 614 food and drink transactions for 2016, 22 involved sums over $1,000 million, which was lower than in each of the previous four years (27 in 2017 and 30 in 2014), but higher than in 2011.
Globally, Anheuser-Busch InBev, Nestlé, Emmi, Constellation Brands, Frutarom and Sazerac were the most acquisitive companies of 2016, with each responsible for 6 or more takeovers. Coca-Cola, Danone and DMK all made five purchases, according to Zenith.
Asian interest heats up
Cometline Consulting found offshore buyers were responsible for four of the five Australian acquisitions with transaction values greater than $100 million in 2016. Three of the offshore buyers are based in Asia, with the other based in the USA. Australian based private equity fund Pacific Equity Partners (PEP) was the only domestic entity to announce an acquisition with a reported transaction value of greater than $100 million.
The Sealanes acquisition by Superior Food Services is also likely to exceed $100 million, however the transaction value is not publicly available. Quadrant Private Equity owns Superior Foods Services making private equity firms PEP and Quadrant the ultimate acquirers behind the two largest domestic acquisitions in 2016.
Dairy sector cools down
The dairy sector recorded only four transactions in 2016 compared with 10 transactions in 2015, according to Cometline Consulting, with the acquisition of 79 per cent of Burra Foods by Chinese dairy farming company, Inner Mongolia Fuyuan Farming, for $237 million being the standout transaction in 2016.
Fonterra Australia also sold its Wagga Wagga manufacturing site and the Riverina Fresh brand to Blue River Group in August 2016. The disposal is consistent with Fonterra’s strategy of divesting non-core assets.
Beston Global Food Company acquired Australian Provincial Cheese and the cream cheese brands Mable’s and Grange Peak for $2.2 million in September 2016.
Fresh produce fires up
Conversely the fresh produce sector recorded six transactions in 2016 compared to no transactions reported in this sector in 2015.
Premier Fruits Group and New Zealand-owned La Manna Group announced a merger of equals in late June after a 10-year joint venture relationship, and Perfection Fresh and Fruit Master, announced the merger of their table grape businesses in September 2016.
Mitolo Group, a South Australian potato and packaging company, acquired the South Australian farms and all the packaging businesses of Oakville Produce, and Costa Group acquired the Avocado Ridge orchards and packing operations in central Queensland from the Carney family.
