Glenboden M & A Originations

Cadbury’s three bolt-on acquisitions sets pattern for future M&A criteria

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Origination Status acquisitions agreed or completed, June 2007;
Asset Intergum (Turkey), Kandia-Excelent (Romania), Sansei Foods (Japan);
Sector chewing gum, general confectionery, functional candy
Buyer Cadbury-Schweppes PLC (UK), world’s largest confectionery company;
Seller Amram family (Turkey), Meinl Bank (Romania), public shareholders (Japan);
Buyer Rationale portfolio focus on high-growth confectionery markets and categories;
Seller Rationale attractive valuations;
NBs all three deals announced within space of 10 days
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These three deals confirm that Cadbury is putting its words into action, as they are consistent with the group’s new strategy of making bolt-on acquisitions to enhance their position in existing growth markets and categories around the world. There will be other emerging geographies, with large populations, where Cadbury is likely to take similar positions through acquiring major incumbents. Our tip is eastern Europe and southern Asia.

Intergum has a 46% share in the Turkish gum market, which grew by 17% in 2006. This serves to justify the high valuation, as does Intergum’s regional platform (25% of sales are exports), and the synergies with Cadbury’s existing market leadership in candy in Turkey. This deal also confirms Cadbury’s appetite for competing head-on with Wrigley in gum, around the world.

We predicted that Kandia would be acquired by Cadbury, after the Romanian group bought Kraft’s sugar confectionery business in that country, several months ago.

Kandia has a 20% share in the total Romanian confectionery market, which grew by 17% in 2006. It is no.2 in chocolate, with a 24% share, and no.1 in candy with a 32% share. It is also a company with a lot of ‘legacy’ equity, certainly on the Kandia side of the business. No financial terms given, but we assume that the private equity arm of Meinl Bank is very happy with the deal.

Sansei sells sugar-free functional candy, and had a 4% share of the 1 bln GBP Japanese candy market in 2006. Although not a major market share play, and in a relatively mature if big market, the company’s functionality products are complementary to Halls and to Cadbury’s substantial gum business in Japan.

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THIS LEAD'S VALUATION
Size (€ mln) 345
Sector chewing gum
Asset Quality Turkey no.2 branded
Seller family group
Buyer large plc
P/S 4,1
P/Ebitda n/a
Type enterprise value
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