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Food Institute News

Food Institute News

Food Industry M&A's Up 30% In First Half

Following a relatively quiet year for mergers and acquisitions in 2009, the first half of 2010 demonstrated a marked uptick in deals across many segments in the food industry. The Food Institute published its merger and acquisition analysis through the first half of 2010, reporting a 29.9% increase in mergers over the previous year. Investment capital flowed a little more liberally, demonstrated by the 20% increase in mergers among investment firms and banks in the first half of 2010.

Posted: Jul 23, 2010

Contact: Henry Mollman
201 791-5570, ext. 215

UPPER SADDLE RIVER, NJ (July 23, 2010) - Following a relatively quiet year for mergers and acquisitions in 2009, the first half of 2010 demonstrated a marked uptick in deals across many segments in the food industry. The Food Institute published its merger and acquisition analysis through the first half of 2010, reporting a 29.9% increase in mergers over the previous year. Investment capital flowed a little more liberally, demonstrated by the 20% increase in mergers among investment firms and banks in the first half of 2010. (Click here for table) Venturing into numerous segments in the food industry, private investment flooded into restaurants such as the iconic CKE Restaurants, Inc. as well as rapidly expanding upstarts like Wingstop Restaurants, Inc. Additionally, the 165-year-old Pabst Brewing Company changed hands from the charitable foundation parent of The S&P Company to Metropoulos & Co. and chief investor C. Dean Metropoulos for about $250 million. The deal placed the value and cache of the brand in Mr. Metropoulos' experienced hands, generating interest in the press due to the investor's history of reviving major food brands such as Vlasic Pickles and Chef Boyardee.

Elsewhere in the industry, activity among food processors grew at a modest rate with the biggest increases occurring in the multi-product, snack food and fruit and vegetable processors. Kraft Foods acquisition of Cadbury PLC captured the attention of the mainstream media across the Atlantic, but the finer stipulations of the deal, including Kraft's required divestiture of its frozen pizza business to Nestle S.A., were glossed over by many.

Mergers and acquisition activity in the supermarket category remained lively in 2010, doubling the total number of deals in 2009's first half, with many acquisitions following bankruptcy filings and the divestiture of regional assets by larger retailers. The most significant deal of the year was the Tops Friendly Markets' successful bid for Penn Traffic's assets, following the latter's Chapter 11 filing in November 2009. Tops acquired 79 Penn Traffic locations on Jan. 29, and subsequently sold five locations in western Pennsylvania to Giant Eagle, Inc. The thinning pool of distressed supermarkets and grocers makes such blockbuster deals less likely than in the recent past, but opportunities still exist for retailers with capital and the distribution reach to supply stores in new markets.

Looking ahead to the second half of 2010, M&A activity almost assuredly will exceed 2009's totals and continue to widen the margin between the years, expects the Food Institute. Anticipation for the remaining year will only be marked by optimism when compared to the previous year's subdued activity, with many economic signifiers indicating growth failing to meet expectations. Discouraging economic expansion has consistently reduced hopes for a large-scale and speedy recovery, however buoyed by hope, as unemployment numbers remain stuck at around 10% and consumers continue to spend at a tempered rate with confidence rebounding slowly and at a lesser rate than predicted.

The Food Institute merger database, updated weekly, provides a comprehensive record of all the notable and marginal M&A activity occurring within the food industry. Deals that change the landscape of the industry as well as those that serve as bellwethers for larger trends are reported, granting a perspective that ranges from the macro to the micro. All of the information is located in one archive on the Food Institute website, and is available to all members. In a business as segmented and diverse as the food industry, novice investors and veteran dealmakers alike can take advantage of the resources offered by The Food Institute.

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