Glenboden M & A Originations

How much would Pepsico have to pay for 'Tymbark' in Poland ?

Priority Rating priority rating 4
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Origination Status market rumours of bid, June 2010
Asset 'Tymbark' (Poland), no.1 domestic FJND brand
Buyer candidates include Pepsico, Coca-Cola
Seller Maspex Sp. z o.o. (Poland), no.1 domestic FJND, pasta and instants producer
Buyer Rationale acquisition of market leader in high -potential FJND market, timing
Seller Rationale high valuation
NBs Agros Nova, no.2 in FJND in Poland, was recently acquired by IK Investment Partners
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With 'Fortuna' now in the hands of private equity, the stakes have been raised in the Polish FJND category. Just how much would Pepsico now be prepared to pay a reluctant Maspex for its 'Tymbark' brand, and would there be competition for it from Coca-Cola ?

Pepsico and Coca-Cola M&A surge in FJND ...In recent years, with a consumer health trend away from CSDs and toward FJND, both Pepsico and Coca-Cola have undertaken M&A to acquire both leading and 'new frontier' brands, in various geographies.

... Coca-Cola less acquisitive in CEEPepsico has been more active in the CEE region than Coke. Notably, it acquired Sandora in Ukraine in 2007 and Lebedyansky in Russia in 2008, both the no.1 players in their respective geographies.

Coca-Cola's M&A activity in the region has so far been limited to the one market that qualifies as a BRIC geography, Russia, where it acquired the no.2 player Multon in 2005, and is said to be eyeing the country's no.3, Nidan, in order to overtake Pepsico into first place.

While in central Europe, Coke is focusing its efforts behind 'Cappy', a regional brand created in-house, and seems less interested in acquiring 'local heroes'.

Tymbark fits Pepsico perfectly ...In Poland, Maspex is the market leader in FJND (source: AC NIelsen), with an estimated 35% value share. Most of that is generated by the 'Tymbark' brand, (although Maspex also has a strong child-segment offering called 'Kubuś').

Cappy has under 5% share in FJND, and Pepsico's 'Tropicana' is almost non -existent. Given its M&A history in neighbouring countries, and the opportunity to leapfrog a struggling Coke, Pepsico must surely have Tymbark in its sights.

... consolidation's time may be approaching ...That interest was passive so long as M&A in Polish FJND was 'on hold'. But with the recent news that Agros Nova is to be acquired by a private equity firm, the consolidation wave sweeping FJND in Europe may come to Poland

Accordingly, market rumours are now emerging that Pepsico is making a bid to Maspex for 'Tymbark'. But how much would they have to pay a reluctant Maspex to obtain that prize ?

... market position premium ...There's certainly a premium to be paid for Tymbark's sustainable market leadership, at this time. The joint no.2 players is the market, Hortex and Agros Nova, are well behind in market share terms, each having about 15%.

... competition in disarray ...On top of that, those competitors are weakened now. Hortex is in ownership stagnation, with Argan Capital unable to sell Hortex because the brand covers both its FJND and frozen divisions, causing common -brand issues for potential buyers of the two units.

Agros Nova's flagship Fortuna brand only occupies one-third of the 15% market share attributed to that group in FJND, with three other brands accounting for the remainder. That causes a big migration challenge for the new owners.

... ingredients for a high valuation ...So the conditions are all set, in terms of M&A trajectory, timing, market developments and competitive advantage, for Pepsico to pay a very high price to prise Tymbark out of Mapex's hands.

The best comparative transaction is arguably the Lebedyansky deal in Russia, in which Pepsico paid a reported x2,5 Sales multiple for the market leader in FJND in that geography (see valuation).

...'the gift that keeps giving'In that scenario, the 'exit multiple' for Maspex would be quite impressive, considering the amount it paid for a profitable Tymbark when it acquired it from a National Investment Fund in 1999 - € 30 mln.

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THIS LEAD'S VALUATION
Size (€ mln) 500
Sector fruit drinks
Asset Quality Poland no.1 branded
Seller private corporate
Buyer large plc
P/S 2,5
P/Ebitda n/a
Type value estimate
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