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Issue 14
Q1 2013
Consumer Products Deals Quarterly
Deal sentiment turning positiveAnalysis of transactions in Q1 2013 in the global consumer products sector
Contents
Data analysis 4
Deal sentiment becoming more positiveActivity gradually improvingData highlights Q1 13Top 10 deals Q1 13
Investment themes 7
This quarter’s top trendsUS dominates top 10 deals
Overarching trends
Pursuit of health and wellness as an end in itself
Deal analysis 9
Top 10 deals in Q1 13
New regulatory hurdles for AB InbevSABMiller expands China footprint
Aryzta expands into Germany
Consumer Products Deals Quarterly Issue 14
WelcomeConsumer Products Deals Quarterly — a report from Ernst & Young that analyzes
prominence of US-based transactions in the top 10 deals and signs that valuation multiples are rising — both
We hope that the data and perspectives we offer will be of use to the leaders of consumer products companies
David Murray
Ernst & Young
Consumer Products Deals Quarterly Issue 14 3
4 Consumer Products Deals Quarterly Issue 14
Data analysis — Deal sentiment becoming more positive
Data analysisDeal sentiment becoming more positive
Activity gradually improving
Growing numbers of smaller transactions are the basis for the improvement in deal activity while the more sporadic megadeals
Splitting deal activity into three broad size categories of less than
1
Instead we expect to see continued gradual improvement in the
results of the latest Ernst & Young half of consumer products groups expect global deal volumes to
2
Increase in deals announced in Q1 13 compared with Q4 12
9%
Total value increases, bolstered by the announcement of the Heinz megadeal
Data highlights Q1 13
Deal volumes Q2 10–Q1 13
Deal volumes rise, tipping long-term average upward
0.0
0.2
0.4
0.6
0.8
1.0
0
20
40
60
Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13
Ave
rage
dea
l val
ue (U
S$b)
Tota
l dea
l val
ue (U
S$b)
Food Beverages HPC Tobacco Average LTM value Average deal size
Deal values Q2 10–Q1 13
220 26
5
258 33
8
331
312
232
231
222
206
221
243
66 70
76
84
72
81
69
66
60
65
69 68
39 34
49
36
53
54
52
40
25
43
25 32
3
1 3
2 4 8
4 4
2 3 3
4
0
100
200
300
400
500
Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13
Num
ber
2
5Consumer Products Deals Quarterly Issue 14
Data analysis — Deal sentiment becoming more positive
Private equity activity volume decreases, but value surges
Private equity vs corporate deals Q2 10–Q1 13
272
317
319
339
343
334
278
285
261
264
258
292
56 53 67
121
117
121 79 56 48 53 60 55
0%
20%
40%
60%
80%
100%
Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13
Corporate PE
Num
ber o
f dea
ls
Deals announced in Q1 13347
HJ Heinz Co ($28,000)3G Capital Partners/Berkshire Hathaway
Cia Cervecera de Coahuila ($2,900)
Kingway-Brewery Bus Asts ($864)
Grupo Yoli SA de CV ($749)
Unilever US-Skippy Business ($700)
Copeinca ASA ($545)
Bristol-Myers Squibb-Brands ($482)
Milk Specialties Global ($468)
Hostess Brands-Snack Cake ($410)
Klemme AG ($375)
Disclosed value (US$m)
Constellation Brands Inc
China Resources National Corp
FEMSA
Hormel Foods Corp
China Fisheries
Reckitt Benckiser Group PLC
Canada Pension Plan
Apollo Global Management LLC
Aryzta AG
Americas dominate geographic top 10 deal activity
Food and beverages dominate in the quarter’s top 10 deals
There were six food deals and three beverage deals in the top 10 largest
The top 10 deals were in the following subsectors
Food deals
Beverage deals
HPC deals
6 Consumer Products Deals Quarterly Issue 14
Data analysis — Deal sentiment becoming more positive
Corporate deals by subsector Beverages -10% 2%Food 17% 192 7%
20 40% -22%Tobacco 4 2 100% 4 3 33%Total 292 258 13% 292 285 2%
Beverages 13 13 12Food -17% 39 -3%
4 -20% 4 4 0%Tobacco 0 1 0% 0 1 0%Total 55 60 -8% 55 56 -2%
Deals announced Q1 13 Q4 12 Seq % change Q1 13 Q1 12 YoY % change
Beverages -1% 3%Food 243 221 10% 243 231
32 32 40 -20%Tobacco 4 3 33% 4 4 0%Total 347 318 9% 347 341 2%
Global consumer products corporate and PE transactions scorecard by subsector
Top 10 deals in Q1 13
Buyer nameBuyer country Target name
Target country
Disclosed value (US$m)
Announced date (DD/MM/YYYY) Status Deal type Sector
Cross-border or in-border
3G Capital Partners/ United States United States 14/02/2013 Pending PE Food In-border
Constellation Brands Inc
United States Cia Cervecera de Coahuila
Mexico 14/02/2013 Pending Corporate Beverages Cross-border
China Resources National Corp
China Kingway-Brewery Bus Asts
China Pending Corporate Beverages In-border
FEMSA Mexico Grupo Yoli SA de CV Mexico 17/01/2013 Pending Corporate Beverages In-border
United StatesBusiness
United States 03/01/2013 Completed Corporate Food In-border
China Fishery Group China Copeinca ASA Peru Pending Corporate Food Cross-borderUnited Kingdom Brands
Mexico 12/02/2013 Pending Corporate Cross-border
Canada Pension Plan Canada United States Pending PE Food Cross-borderApollo Global United States United States 30/01/2013 Pending PE Food In-border
Aryzta AG Switzerland Klemme AG Germany 20/02/2013 Pending Corporate Food Cross-border
88%The top 10 deals in Q1 13 had a combined value
of US$35b — 88% of total disclosed deal value.
Consumer Products Deals Quarterly Issue 14 7
Investment themesThis quarter’s top trends
US dominates top 10 dealsA number of investment themes are evident from Q1 13 deal
country in four of the top 10 deals and the buyer is US-based in
strengths
3
David Murray
Ernst & Young
“Valuation multiples of public companies in the major
3
Private equity back in the spotlight
larger deals against corporate buyers with cash on their balance
4
Investment themes —
8 Consumer Products Deals Quarterly Issue 14
Public to private
attractive for those that believe implementing strategic change is
We therefore do not expect to see a
Overarching trendsThe pursuit of growth opportunities and scale in rapid-growth marketsAnalysis of the sector demonstrates that the vast majority of
Both global consumer products groups from the
Consolidation and portfolio optimization within developed marketsGiven that half of worldwide growth over the next 10 years
7 it is still very important for companies to
7
portfolio optimization theme has several strands:
•
• Expansion into new geographies
• categories
• Divesting non-core or low growth businesses and securing economies of scale
or buying out the minorities in businesses where they already
Pursuit of health and wellness as an end in itself
about establishing a presence in the fast-growing health and
with the pharmaceuticals sector as businesses expand into
Investment themes —
Consumer Products Deals Quarterly Issue 14 9
10
11
12 Analysts at Credit
margins three years from now as the company … starts reaping 13
New regulatory hurdles for AB InBev
transaction aimed at overcoming US regulatory resistance to
14
concerns surrounding the AB InBev/Modelo deal and thus now
10 The Motley Fool11 Credit Suisse equity
research12
13 Credit Suisse equity research
14
Jeffries Equity Research Europe
The quarter’s biggest deal was the acquisition of Heinz
US$28bPrivate equity announces Heinz purchase
price the day before the announcement and a 19% premium to the
Gregory Stemler
Ernst & Young
there will probably be assets bought and sold on the
The rationale for the deal is the pursuit of stable growth in
Analysts at Sanford
9
Steven PotterTransactions Advisory ServicesErnst & Young
products sector is typically less volatile than other
Just Food
Deal analysisTop 10 deals in Q1 13
Deal analysis — Top 10 deals in Q1 13
10 Consumer Products Deals Quarterly Issue 14
SABMiller expands China footprint
Steve Wills
Ernst & Young
“Strategic buyers are willing to pay high multiples for
A strategic buyer will help Kingway to achieve economies of
after negotiations with other bidders fell apart over differences in
these deals should be less on valuation and more on the potential
issue is more about long-term positioning than about short-term 17
Andrew Cosgrove
Ernst & Young
products companies are using different ownership
Dow Jones17
Capital Equity Research
Further consolidation in Mexican Coca-Cola bottling market
merger of its Mexican competitors Embotelladoras Arca and Grupo
company can generate synergies from the geographic proximity
19
19 Dow Jones
Deal analysis — Top 10 deals in Q1 13
Consumer Products Deals Quarterly Issue 14 11
Unilever’s move away from food is an opportunity for Hormel
20
recent years because of higher prices and a health-driven aversion 21
22
23
range of “medical food products for use under medical supervision in the nutritional management of patients with mild cognitive
24
20
21
22 Credit Suisse Equity Research
2324 Just Food
Global challenger China Fishery Group looks to rapid-growth markets
China Fishery Group will fund the tender offer through a combination of a rights issue and debt
Press reports suggested that part of the rationale behind China
was to help it meet growing demand for seafood in China at a time when territorial disputes with neighboring countries are reducing
27
and distributor of meat and ready-to-eat products in China for
27
Deal analysis — Top 10 deals in Q1 13
12 Consumer Products Deals Quarterly Issue 14
Reckitt takes an option on Latin American OTC medicines
for several of its over-the-counter medicines currently sold across
right to purchase these products outright at the end of the
said: “This transaction creates a material consumer health
important step in building our consumer health care presence 29
Private equity active in the distressed space
The deal is the largest of a series of transactions disposing of
30
29
30 Just Food
Lapping up Milk Specialities Global
Aryzta expands into Germany
31
said: “Aryzta has pointed to its struggle for revenue growth
32
31
32
Deal analysis — Top 10 deals in Q1 13
Consumer Products Deals Quarterly Issue 14 13Consumer Products Deals Quarterly Issue 14 13
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Making better decisions faster
Consumer products companies that
brand new order — a highly complex
consumerproducts
Talking series
Barometer
Barometer shows a clear rebound in
executives are steadily trending
transactions
14 Consumer Products Deals Quarterly Issue 14
Methodology
• Deals include transactions between companies in the four
•
•
•
•
• The value and status of all deals highlighted in this report are
•
•
•
•value of deals with disclosed values for the period under
• The disclosed value as stated in the Top 10 deals table is the
made within six months of the announcement date of the
valued based on its closing price on the last full trading day
Consumer Products Deals Quarterly
were pulled from the Thomson Reuters database using standard
Data source and industry scope
Qualifying deals
Consumer Products Deals Quarterly Issue 14 15
Contacts
Region Contact Email/telephone
Global/EMEIA David Murray Global Consumer Products Transactions
John Hope
Americas Gregory J. Stemler
Latin America Jeremy Barnes Transaction Advisory Services
Country Contact Email/telephone
Brazil Alfredo Della Savia
Russia Dmitry Khalilov
India Ajay Arora Transaction Advisory Services
China Robert Partridge
Sector Contact Email/telephone
Global Mark Beischel
Global Emmanuelle Roman
Global Andrew Cosgrove
Beverages Steve Wills
Food Patricia Novosel
Food Mike Sills
HPC Anastasia Economos
HPC Mark Twine r
Tobacco Ed Hudson
Ernst & YoungAssurance | Tax | Transactions | Advisory
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