Glenboden M & A Originations

Maspex prominent on the buy-side in M&A in CEE

Priority Rating priority rating 4
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Origination Status proprietory origination, February 2015
Asset Zito Group (Slovenia), leading domestic grocery products group
Buyer candidates include Maspex, Podravka
Seller investment funds owning 51% of Zito
Buyer Rationale exit from investment
Seller Rationale regional expansion, synergies
NBs in 2015 Maspex's sales will reach 1 bln EUR after acquisition of Agros Nova
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M&A practitioners and observers interested in food products in the CE region will know that Maspex is one of the groups that generates a lot of M&A activity in the region. That trajectory will continue for many years to come; the key question being whether regional spread or domestic dominance, in grocery, will be the group's priority. We look at a couple of potential targets.

Grocery products success story ...Maspex has more than doubled in size over the last decade, to become one of the largest 'native' ambient -shelf grocery products groups in the CE region (by which we mean ex -Communist countries from the Baltics down to the Balkans).

This status has recently been re-inforced by the group's acquisition of the preserves business of Agros Nova, from its private equity owners IK Partners, which will grow the group's overall revenues to around the 1 bln EUR mark for the first time.

Maspex's growth model started with organic development as an importer of instant products in the 1990s (cocoa, cappuccino, creamer etc); then it made a series of step changes through very shrewd acquisitions, in Poland and other CE countries.

... mostly thanks to M&A ...The biggest deals were Poland's no.1 FJND brand, 'Tymark', bought in 1999 from one of Poland's national investment funds, at a price which is only a fraction of what that business is worth today. Then in 2003 they bought 'Lubella', Poland's leading pasta brand, again from a national investment fund for an attractive valuation.

The above milestone transactions have been complemented by bolt-on, sometimes opportunistic deals in Poland, as well as both market entry and bolt-on acquisitions in the Czech Republic, Hungary, Bulgaria and Romania.

Today, Maspex is a broadly -based branded grocery products business, in terms of both portfolio and regional spread, that generates nearly one-third of its sales outside its native Poland. So what next in M&A for Maspex ?

... a buyer not a seller ...We can start by saying it's very unlikely that Maspex will be making non-core divestments any time soon. The group was founded and is owned by six men, that have know each other since their youth, whose ambition appears to be to own and develop as many brands as possible.

Maspex wouldn't even sell its tiny breadsticks business, to a client of Glenboden's some time ago, on the basis that it might become strategic one day. We understand also that attempts to buy the group's FJND production facilities, to allow Maspex to focus on marketing, where it excels, haven't succeeded.

On the other side of the coin, mindful of the group's M&A trajectory, business model and owners' strategy, as well as consolidation opportunities in the CE region, we believe that the acquisition story at Maspex will run and run for the next decade or so.

... Zito currently available ...Maspex's acquisition strategy is to target companies that will add scale to the group's existing distribution model. Slovenia's Zito is currently undergoing a divestment process, and broadly meets Maspex's criteria. It's acquisition would add cca. 100 mln EUR in revenues to the group, 85% of which are in Slovenia, adjacent to the group's existing geographic footprint.

Arguably most of Zito's diverse product portfolio, other than fresh bread and perhaps confectionery, is attractive to Maspex. Moreover, the strong position of Zito in the Slovenian market provides Maspex with a platform for building a dominant position on the grocery shelf in that relatively affluent CE country.

In view of the stability of Zito's business (see profile), we have estimated a valuation which is 25% above that group's shares' current apparent EBITDA trading multiple (see valuation).

... with Mokate on the wish list ...Zito is relatively low -hanging, although Maspex may be competing in a tender that includes other regional heavyweights like Podravka. A greater prize for the group, however, is possibly Mokate, Poland's largest independent tea & coffee producer, with a CE presence and relatively strong export business including the Middle-East and Asia.

Mokate is a branded and very profitable business, in overlapping and adjacent product categories, which we estimate would grow Maspex's top-line by about 15%. The potential synergies for Maspex from such an acquisition, in terms of both costs and new markets, would also be very significant.

Mokate is a family -owned business which, although currently unavailable for M&A, has in recent years been going through a succession process, down to son and daughter. Many are patiently monitoring the outcome of that.

Domestic or regional strategic priority ?Overall, there will be no shortage of opportunities, over time, for Maspex to continue growing through acquisition in the CE region, finances -permitting.

The question of whether Maspex ends up as a national champion in its native Poland, CE's largest market, or as a more broadly spread regional business competing with the likes of Podravka, will maybe depend on which acquisition opportunities will become available, and their timing.

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THIS LEAD'S VALUATION
Size (€ mln) 90
Sector grocery products
Asset Quality Slovenia diversified branded
Seller mid-cap plc
Buyer privately -held strategic
P/S 0,8
P/Ebitda 10,0
Type enterprise value estimate
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