Glenboden M & A Originations

Who will buy Lawry’s seasonings brand from Unilever ?

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Origination Status second round of tender process for business unit and brand divestment;
Asset Lawry’s (USA), regional sauces and seasonings brand in the US;
Buyer candidates include Heinz, McCormick, ABF and Pinnacle Foods;
Seller Unilever (UK /Holland), multinational FMCG group;
Buyer Rationale high –margin addition to culinary portfolio;
Seller Rationale portfolio restructuring, exit from non -core businesses;
NBs Pinnacle was acquired earlier this year by Blackstone private equity, in a secondary buy-out.
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This pending deal is part of flurry of portfolio ‘trimming’ divestments at Unilever now; businesses and brands that are too small to justify further investment. Also interesting is the line-up of potential acquirors; if Pinnacle emerges as the winner, which we believe it should from a strategic rationale perspective, then a strong signal will be sent that private equity is still a force to be reckoned with, in spite of difficult debt markets.

Pinnacle was acquired earlier this year by Blackstone, in a secondary buy-out. Although the price they paid was quite reasonable, the value –creation –through –restructuring work had largely been done already, by Blackstone’s predecessors; for that reason it’s important for Pinnacle to now make new acquisitions, to create further synergies and top –line growth opportunities, if Blackstone is also to multiply its money. As a $ 150 mln turnover business, Lawry’s is big enough to provide that.

What’s more, Lawry’s would complement Pinnacle’s portfolio very nicely. The group is relatively weak in ‘seasonings’ (wet or dry), where it’s represented by its Open Pit sauce business which is only a regional brand, in America’s Mid-West. Pinnacle’s portfolio overall is more heavily weighted in foods; Lawry provides it with an opportunity to expand further into ‘food accessories’ – culinary products generally deliver higher brand loyalty and margins than foods do.

On top of that, we don’t think Lawry’s is as much of a ‘must have’ for the other cited bidders, as it is for Pinnacle. Heinz is not interested in ‘dry’ seasonings, which are at the core of Lawry’s portfolio; besides, the sauces part of Lawry’s is probably just too small to animate the group sufficiently. McCormick’s 250 brands have 40-60% of the US market for sauces and seasonings. Lawry’s would give it yet another brand, and 10% more sales revenue; is that really worth the marketing focus dilemmas ? As for ABF, it’s true that they’re no. 2 in the US market for herbs and spices, by virtue of their 2004 acqusition of the Turkee, Tone’s and Spice Islands brands from Burns Phelp. But these were the lesser part of a package where the main attraction was an international yeast and bakery ingredients business much closer to ABF’s core. The group has no international brands or ambitions in sauces and seasonings; we don’t think they’ll take on a determined US buyer for Lawry’s.

Also on sale currently, in Unilever’s campaign to trim off small businesses, whose loss would not significantly impact its distribution systems, are its non-branded UK food ingredients business, US laundry activities, and its lonely Boursin fresh cheese brand. This reducing down of the portfolio has been going on for many years at Unilever; how many more assets like these are tucked away in the corners of the group’s website ?

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