Glenboden M & A Originations

Events after Coca-Cola's bid for Bionade validates its new frontier M&A strategy

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Origination Status target company announcement of acquisition bid, September 2007
Asset Bionade GmbH (Germany), pioneer ‘refreshment drink’ recipe and brand
Buyer The Coca-Cola Company (USA), world’s largest beverage company
Seller Privatbrauerei Peter KG (Germany), mid-sized brewer in Bavaria region
Buyer Rationale expanding portfolio beyond CSDs, international commercialisation of Bionade
Seller Rationale long –term intention to remain an independent, family –owned company
NBs Bionade’s sales tripled in 2006 in volume terms, again in 2007
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Bionade’s CEO has said that the offer from Coke was worth ‘hundreds of millions of euros’. For a company that sold 70 mln bottles in the previous year, that suggests a multiple of several times sales revenue in 2006. On the other hand, the huge growth of sales volumes, to 200 mln bottles in 2007, suggests that the M&A strategy of Coke, that of targeting new frontier soft drinks brands, is vindicated; in that case it should have a long way to run, and valuations may remain high.

Coke and Pepsico are the main drivers of this trend. In recent Glenbodens we’ve reviewed Coke’s acquisition of Glaceau and Fuze in the USA, and Pepsico’s acquisitions of Sandora in Ukraine and (potentially) Lebedyansky in Russia. All of them ‘new frontiers’ (whether geographically or technologically), all of them at Sales multiples that might look like EBITDA multiples to some of us.

In recent Glenboden’s we’ve also mused that Coke and Pepsi must be keen to buy Germany’s Eckes –Granini. Right country, wrong company. Eckes –Granini is an impressive, fast –growing juice business, meanwhile Bionade looks like something that might genuinely be the next Coca-Cola.

The provenance is certainly there. Invented in 1995 by master brewer at Peter, Dieter Leopold, Bionade is the child of Germany’s ancient purity regulations for fermented drinks.

The inventor was motivated by a decline in consumption of regional German beer brands; Bionade now sells 20 times more volume than its mother –company does.

The recipe uses organic ingredients, and the company has supported local barley suppliers in their switch to organic farming.

Bionade’s owners have rejected Coke’s offer in that familiar, stoical, ‘mittelstandt’ way – ‘the company’s our baby, and babies are not sold’, to quote one of its partners. Subsequent growth suggests that Bionade remains sustainable as a stand-alone business, but that might hit a ceiling one day.

Bionade is most likely to achieve its potential inside a group with global distribution and bottling clout. So far, most sales appear to be through foodservice channels, and sales outside Germany are very small so far. At the same time, the company is to launch Bionade in the US and Japan in 2008; how successful can they be on their own?

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