Glenboden M & A Originations

Latest deals show valuations are low in commodity -sensitive categories globally

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Origination Status two company acquisitions announced in March 2008, spanning Australia and Ireland
Asset Breeo Foods (Ireland), domestic dairy and meat producer; Paradise Food Industries (Australia), no.2 branded domestic biscuit producer
Buyer Kerry Foods (Breeo), Goodman Fielder Ltd (Paradise)
Seller Reox Holdings plc (Breeo), Archer Capital (Paradise)
Buyer Rationale acquisition of legacy dairy and meats brands (Kerry); entry into large biscuit market (Goodman)
Seller Rationale poor performance in high commodity cost environment
NBs in both cases all parties to the deal are domestic
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These two deals illustrate that right now, from one end of the world to the other, there are strong brands on sale, at attractive prices, in categories which are most sensitive to high raw materials costs. Dairy, meats, ready meals and biscuits are all very sensitive to that. More deals with this profile should be anticipated around the globe.

Paradise Foods is the no.2 branded player in the large Australian biscuit market, with leading brands in several categories and modern production facilities. The acquirer, Goodman Fielder, is the country’s largest listed food group, with eight product divisions, for whom Paradise fills a gaping hole in the portfolio. They’ve managed to buy the business cheaply, from a private equity fund who cannot afford to wait for commodity prices to fall; Archer Capital acquired Paradise less than two years ago.

Breeo Foods, likewise, owns leading dairy and meats brands with high household penetration. We can conclude that Kerry is buying it cheaply; the EBITDA margin is low, at 8%, but Kerry can extract huge synergies by adding Breeo to its existing portfolio of dairy, meat and chilled foods brands. The seller, Reox, can now focus on its more profitable divisions of DIY retail and property. A final twist, to confirm that insiders get the best deals – both Kerry and Reox started out as dairy co-operatives in Ireland.

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THIS LEAD'S VALUATION
Size (€ mln) 165
Sector meat and dairy
Asset Quality Ireland leader branded
Seller mid-cap plc
Buyer large plc
P/S 0,9
P/Ebitda 10,9
Type total consideration
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