Glenboden M & A Originations

Orkla Foods begins divestments in central Europe with cheap sale of Graal in Poland

Priority Rating priority rating 3
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Origination Status agreement announced for subsidiary divestment, September 2007
Asset Superfish SA (Poland), no.6 domestic processed fish producer
Buyer Graal SA (Poland), no.1 domestic processed fish producer
Seller Orkla Foods (Norway), subsidiary of Orkla Group, Norwegian conglomerate
Buyer Rationale scale and consolidation opportunity
Seller Rationale unsatisfactory financial growth and market position of Superfish
NBs with this acquisition Graal’s domestic market share increases to 28%
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This deal strongly supports the belief that domestic players are able to buy businesses, from foreign groups in ‘get rid of’ mode, cheaply. Other businesses in Orkla Foods’ central European portfolio, notably in Poland, the Czech Republic and Romania, may be next on the block as the group re-focuses.

The Polish market for processed fish is growing, and per capita consumption is only half of that in countries like France or Britain. Superfish is a well-invested business, with modern products and brands. On the other hand, being only no. 6 in the market, with a 5% share, it’s not surprising that Orkla divested it.

They could have tried to aggressively grow through acquisition, but Orkla is perhaps too diversified a group, to focus in such a way.

Graal has received a gift, at that valuation level, regardless of Superfish’s profitability (see valuation). As a result, it strengthens its market leadership, broadens its portfolio, gains competence, increases its profile in the all-important modern trade, and gains synergy opportunities.

Other assets that Orkla might consider selling in central Europe, as part of its re-focusing strategy, include Kotlin and Elbro in Poland, Guseppe in the Czech Republic, and

Kotlin is a weak no.3 producer of ketchup, tomato-based sauces, jams, ready meals and preserved vegetables. Elbro’s is a minor producer of dumplings, noodles and pierogi ('Rsuuian ravioli'). In 2008, the two companies’ consolidated sales totalled only PLN 97 million; placing them far from critical mass.

Another candidate in Orkla's portfolio is Guseppe, which produces frozen pizzas and frozen, ready-to-use products, primarily for the Czech and Slovak markets. The company has a weak market position, with turnover of only CZK 241 million in 2007.

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Size (€ mln) 10
Sector fish preserves
Asset Quality Poland no.6 branded
Seller large plc
Buyer mid-cap plc
P/S 0,3
P/Ebitda n/a
Type enterprise value
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