Glenboden M & A Originations

Grupo SOS achieves breakthrough into global status with Bertolli acquisition

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Origination Status joint announcement of structured asset divestment and perpetual brand licence, July 2008;
Asset ‘Bertolli’ Italian olive oil and balsamic vinegar businesses;
Buyer Grupo SOS (Spain), no.2 domestic listed food company with international presence;
Seller Unilever (UK /Holland), multinational FMCG group;
Financial Terms total headline consideration of € 630 mln, represents P/S of 1,66 and P /EBITDA of 10,5 (2007);
Buyer Rationale global leadership in branded olive oil;
Seller Rationale portfolio restructuring, exit from low-margin grocery businesses;
NBs deal also includes Maya, Dante and San Giorgio brands, as well as factory in Inveruno, Italy .
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Grupo SOS already claimed to own the strongest olive oil brand in the world, Carbonell in Spain, but the acquisition of Bertolli will bring it authentic global status. It will also increase the group’s total revenue by 25%, to about € 1,8 bln, and moreover will tip the international share of that figure to over 50%. Most importantly, SOS has gained a strong platform for further acquisitions, especially in Europe and the US, that support its mission of bringing the famed Mediterranean diet to consumers. Sectors are mainly edible oil, rice and biscuits, but look also at pasta, sauces and snacks in future.

In recent months, we predicted first that Barilla, and then the emerging Savola Group in Saudi Arabia, were likely buyers for Bertolli. The outcome with SOS is therefore a surprise to Glenboden; however, considering the group’s strong presence in edible oils in both Holland and Italy, they are clearly well known to Unilever and are likely to have been interested in Bertolli for some time.

Also it might be that other potential buyers, certainly Barilla, were put off by the restrictions placed in the deal on portfolio development. The acquisition is structured as a ‘perpetual world licence for the rights to Bertolli in the olive oil and premium vinegar categories’. Unilever has emphasized that it’s retaining the brand rights for all other categories including margarine, pasta sauces and frozen meals. That’s because ‘the Bertolli brand remains a priority for Unilever, with strong growth plans based on capturing the growing appetite for Mediterranean food products’ …

Trouble is, that’s exactly the buyers’ business mission as well, and so it’s unlikely that the ambitions of SOS will stay restricted to low –margin olive oil and vinegar. One can expect a high risk of future conflicts drove the deal terms, which might explain the opaque terminology used by the buyer in describing the consideration involved; ‘€ 630 mln, of which € 560 mln is the value of the various assets comprising the transaction and € 70 mln is working capital’. It sounds like the cash amount paid to Unilever might be significantly lower than the headline figure, with the rest being valuation of assets acquired and injections into the business. That would certainly help explain the high level of the declared valuation; significantly higher than the x0,67 - x1 Sales predicted by Glenboden and others.

Coming back to SOS itself, it’s a company that’s doubled in size in the last five years, but largely thanks to a string of seven acquisitions made since 2000. In fact in 2007, in which no purchases were made, the group stopped growing its top line. It’s clearly an animal that needs acquisitions in order to grow; you should look for more of them, once Bertolli is brought into the fold.

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THIS LEAD'S VALUATION
Size (€ mln) 630
Sector culinary
Asset Quality global leader branded
Seller large plc
Buyer mid-cap plc
P/S 1,7
P/Ebitda 10,5
Type total consideration
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