Q2 a period of key deals
by Monica Watrous
KANSAS CITY, Mo. — Though limited in number, food and beverage acquisitions during the second quarter reflected widespread strategic trends in the industry. While several companies sought to expand capabilities and channels through transactions, others sold non-core businesses in an effort to focus on higher performers in the portfolio.
“There weren’t a lot of notable deals, but there were some key notable deals,” said Matthew O’Loughlin, a partner with the law firm Manatt, Phelps & Phillips, LLP, who counsels public and private companies, investors and private equity groups in the food and beverage industry.
Smaller transactions during the quarter showed heightened interest in health-driven and snack brands. In April, the Hain Celestial Group announced its acquisition of Rudi’s Organic Bakery, and Hillshire agreed to purchase Van’s Natural Foods. At the end of June, TreeHouse Foods agreed to acquire Flagstone Foods, a manufacturer of private label snacks that include nuts, trail mixes and dried fruit.
In general, however, activity remained relatively soft as the economy continues to slowly rebound, O'Loughlin said.
“The pace of activity is keeping up with last year, year-to-date,” he said.
Tyson Foods' acquisition of Hillshire Brands was a key deal in the meat and poultry industry that occurred during the second quarter.
Tyson Foods in July entered into an agreement to acquire all outstanding shares of Hillshire Brands for $63 per share in a transaction valued at approximately $8.55 billion. The deal followed a bidding contest with Pilgrim’s Pride Corp. and was contingent on Hillshire terminating its merger agreement with Pinnacle Foods, which had been announced on May 12.
For Tyson, the acquisition strengthens its position as a leader in retail prepared foods with iconic brands.
“Tyson has been looking to grow its business in a more profitable way, and this was a way for it to try and do that, by adding the branded meat businesses,” O’Loughlin said. “So, it makes a lot of sense. The question everyone is talking about, though, is valuation and whether the strategic imperative may hurt the financial model.”