Deal sentiment turning positive · Data analysis 4 Deal sentiment becoming more positive Activity...

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


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



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.


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 —


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 —


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


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



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



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


Consumer Products Deals Quarterly Issue 14 13Consumer Products Deals Quarterly Issue 14 13

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Barometer

Barometer shows a clear rebound in

executives are steadily trending

transactions


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


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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