Glenboden M & A Originations

Barilla to face problems finding buyers for the retail bakery side of Kamps

Priority Rating priority rating 3
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Origination Status seller announcement of intention to divest subsidiary’s daughter company, March 2008
Asset Kamps Bakeries GmbH (Germany), craft bakery chain belonging to Kamps AG
Buyer private equity and/or franchisees of individual bakeries ?
Seller Barilla (Italy), no.1 global pasta producer with significant bakery business
Buyer Rationale attractive valuation, opportunism
Seller Rationale focus on turnaround of core branded bread business of Kamps
NBs Kamps Brot und Backwaren GmbH, main division of Kamps, is not part of the sale
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Recently, we argued that Barilla should not sell Kamps at this time, because it would make far too big a loss, possibly even € 1 bln. Instead it should hold onto it until better times. Thankfully it looks like Barilla will be sensible, after all, and just sell off the retail bakery part of Kamps, which only constitutes about 20% of its total sales. This will allow Kamps to focus on its core business of branded, packaged fresh bread manufacture. However, given the proximity nature of the fresh bread retail business, it’s likely that Barilla will sell cheaply to local investors, perhaps even the franchisees.

Kamps’ two brands, Golden Toast (Germany’s no.1 toasting bread) and Lieken Urkorn (whole-grain bread specialist), have been hit hard in recent years by lower priced competition from non –branded bread, especially in discount stores. This has caused Kamps to de –premiumise its offering, to some extent, with its Baker’s Family line. It now needs to continue to cut costs, and wait until raw material prices fall to more reasonable levels. Barilla can then decide whether fresh bread is as core to it as crisp-bread is (Wasa brand).

In this context it’s wise for Kamps to divest its 1.000 retail bakeries, with their craft and unbranded profile. But who will buy them ? With a rumoured price tag of only x0,5 Sales, low even for a trading business, it looks like we’re in MBO territory, but without the private equity backers. Maybe the numerous franchisees, basically shopkeepers, will just take the bakeries off Kamps’ hands.

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THIS LEAD'S VALUATION
Size (€ mln) 100
Sector bakery retail
Asset Quality Germany unbranded
Seller large corporate
Buyer private
P/S 0,5
P/Ebitda n/a
Type total consideration
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