Glenboden M & A Originations

Wessanen continues to downsize with frozen snacks disinvestment

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Origination Status agreement reached on formation of joint company and assets contribution, April 2007
Asset branded and private label frozen snacks businesses of Wessanen and Habek Snacks
Buyer Royal Wessanen NV (Holland), multinational food group (majority partner)
Seller Rabo Capital (Holland), regional private equity investor (minority partner and Habek owner)
Financial Terms cash-neutral, share split 60,6% Wessanen and 39,4% Rabo Capital
Buyer Rationale disinvestment from mature and non-core business
Seller Rationale teaming-up with strategic investor and consolidated production synergy potential
NBs deal also includes three production facilities (two Wessanen, one Habek)
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This deal is part of Wessanen’s strategy of divesting or at least disinvesting from its mature and private label businesses, in order to focus on the branded premium-authentic and health foods of the future. We earlier reviewed the previous deal in this programme, Wessanen’s divestment of Dailycer and Delicia to a private equity firm. We suggested that, although private label and non-core, these businesses were not underperforming and had defensible market positions, so divesting them (at quite a low valuation) was perhaps too bold a move. Although this time Wessanen has taken a more subtle and ‘structured’ approach, the fact is the group continues to downsize. Will it bounce back as an independent, or become the subject of a takeover bid ?

In theory this is quite an attractive arrangement for Wessanen. They’ve managed to ‘park’ this business in a newco, and created a synergy potential for lower manufacturing costs, the burden of which it appears to have off-loaded to Habek (i.e. Rabo Capital?). It will also keep its ‘Beckers’ frozen snacks brand, effectively outsourcing its production to the newco. By keeping a majority equity stake, however, it might have retained more corporate responsibility than it would have liked. Possibly this resulted from an asset value parity in Wessanen’s favour, with Rabo not wanting to pay any cash to redress the balance.

Not an obvious deal for a private equity firm to make. Given the nature of this business and Wessanen’s motivation, Rabo is unlikely to sell its minority stake to their strategic investor at a multiple-of-money. On the other hand Rabo is part of Rabobank which has a strategic relationship with Wessanen, in the context of which a relatively humble deal like this one is feasible. A corporatist, traditional type of private equity that’s very different to modern buy-out firms.

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