We are barely into the middle of January, and it’s already become clear that 2018 is going to be a whopper of a year for mergers and acquisitions. M&A’s, they call them.
Not that 2017 was sluggish. Ferrero was an active player last year, acquiring Ferrara Candy Co. and the Fannie May assets of 1-800-Flowers, Inc. And, as most of you have heard yesterday, it kicked off 2018 with an even bigger blockbuster by successfully hunting down another crown jewel, Nestlé’s U.S. confectionery business.
There was, of course, intense speculation about who was going to finally win out in the bidding war, with Ferrero and The Hershey Co., the two mega players going toe-to-toe in the final week before the announcement.
Raphael Moreau, senior food and nutrition analyst at Euromonitor International, called it when he said it would most likely be Ferrero.
“Nestlé’s most prominent chocolate confectionery brand in the United States, Butterfinger, has suffered against brands with a more premium positioning, including Lindt and against larger players such as Mars,” he said in early January.
“Although private equity companies have shown interest, it is likely that Ferrero would be willing to pay a higher price premium [$2.91 billion] in order to achieve its strategic goal of boosting its presence in the United States,” Moreau continued. A successful transaction would make Ferrero the third largest player in chocolate confectionery in the United States, as he rightly pointed out.
But as we all know, there always something churning in the M&A world. For example, just recently word came that Goldman Sachs Group Inc.’s private equity arm and Vestar Capital Partners were exploring a sale of U.S. food manufacturer, Hearthside Food Solutions LLC. Although there has been official confirmation, rumor has it the sale could fetch $2.5 billion.
Hearthside, of course, was built on acquisitions, having just announced at the end of 2017 that was going to purchase the snack bar division of Standard Candy Co. But then this is what venture capital companies do; they buy and then they sell. And more of them are looking at the confectionery segment.
And let’s not forget everything that transpired last year involving players in the food industry: Hershey gobbling up Amplify Snack Brands; Mars taking a minority stake in KIND; and Campbell Soup Co.’s planned acquisition of Snyder’s Lance.
But not everyone is jumping onto our band wagon. There are companies, such as Helsinki-based Raisio, that have jumped off. The Finnish food/feed company sold its confectionery business, which includes popular brands such as Poppets, Fox’s, XXX, Payne's Just Brazils and Pedro, as well as private-label and contract-manufactured products, for €100 million ($120 million) to Valeo Foods Ltd. on Dec. 29, 2017. The deal also includes six production plants in the U.K. and Czech Republic.
As Group’s President and CEO Pekka Kuusniemi explained, “The divestment of the confectionery business is an important strategic step for Raisio on its path towards a responsibly operating forerunner focusing on healthy foods. Together with our already strong balance sheet, the proceeds from the deal allow extensive acquisitions that strategically fit our core business.”
Healthy, however, has different connotations for companies. Consider Eveready Industries India. The dry cell battery manufacturer has entered the Indian confectionery market by launching fruit chews under the Jollies brand. Energize your flashlight and toys while simultaneously doing the same to your body with a healthy fruit chew; I see the connection.
So stay tuned and have your scorecard ready; there are more hot-kettle M&As on the horizon.