Glenboden M & A Originations

EI’s cheap exit from Agros Nova changes lanscape in Polish juices

Priority Rating priority rating 3
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Origination Status exit through sale to strategic co-investor, February 2007
Asset Agros Nova Sp. z o.o. (Poland), no. 2 domestic juice producer with significant jams and cooking sauces business
Buyer Sonda SA (Poland), domestic juice producer and 40% owner of Agros Nova
Seller Enterprise Investors (USA), largest private equity group in central Europe
Buyer Rationale to gain full control of business, diversification
Seller Rationale exit timing (year five)
NBs Enterprise investors achieved a x2,5 return on investment in this deal
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A case of private equity helping to consolidate an industry; then making its target return on exiting the business, but at a valuation arguably below the market level, because of side agreements with its strategic co-investor that stipulated a formula.

Low but satisfactory price ...EI originally bought the then Agros Fortuna, from Pernod Ricard, in 2002. So, they can be said to have exited after the textbook five years. Given the numbers disclosed, it looks like the IRR was in the region of 20-25%.

EI can be pleased with the outcome financially, or at least satisfied that standard targets were met, even if the valuation is low by comparative standards. We estimate that even if one adjusts for sales of third-party goods, and adds long-term debt, the P/S multiple is still below 1,0 on an enterprise value basis.

... strong market share and brands ...Agros is a strong no.2 in the large juice market, with around 20% value share. It’s also market leader in jams and cooking-sauces, with upwards of 40% of each. In addition, revenue growth has been respectable in recent years, in the 5-10% p.a. range.

On top of that, Agros Nova has an unrivalled stable of brands, thanks to EI’s strategy of rolling-up around 'Fortuna' and 'Łowicz'. It owns about eight leading brands, within its categories, that have high recognition amongst consumers.

Five of these brands make it into Poland’s brand ranking of record (2006), where their combined value is estimated at 250 ml zł, which is as much as EI’s gross proceeds from the sale of its 60% shareholding in the whole business.

... re-kindled interest of majors in juices ...This at a time when the global soft drinks majors, led by Coca-Cola and Pepsico, have re-kindled their interest in fruit juices, and are prepared to pay high valuations for businesses in that category.

... better to split the business ...Also, there was compelling logic to sell the preserves business separately, for example to Heinz who was a sure buyer for the cooking sauces and tomato concentrate brand ‘Łowicz’.

... overall an opportunity missedPutting these factors together, we believe EI could have doubled its exit valuation, has it been free to sell its stake in Agros Nova on the open market, albeit in parts, rather than through side agreements with its co-investor the Niewiadomski family.

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Size (€ mln) 65
Sector juices & preserves
Asset Quality Poland no.2 branded
Seller private equity
Buyer family
P/S 0,5
P/Ebitda 8,0
Type equity value
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