Dive Brief:
- After Kraft Heinz Co.’s failed attempt to acquire Unilever, food companies in Europe may be thinking of combining assets for a sizeable leveraged buyout, according to Bloomberg.
- The Anglo-Dutch group is reviewing its entire portfolio for a possible disposal, with its $6.3 billion spreads segment the most likely target, according to Jefferies Research.
- Jefferies analysts say that Nestle SA could consider selling its frozen food and confectionery businesses, which are two areas of slow growth.
Dive Insight:
After Kraft Heinz’s failed attempt to acquire Unilever last month, talks soon ran rampant in the food industry that Unilever was considering divesting its food division and separating it entirely from its personal care unit.
Analysts say that capital is available, interest rates are low, and multiples, while lower than recent years, are still favorable for sellers.
But Unilever isn't the only European companies that could benefit by doing something similar. And with Unilever actively looking at the possibility of divestment, it grants tacit permission to other companies to do the same thing in the name of good business and service to shareholders. The unsuccessful Kraft Heinz takeover of Unilever drives home that there is a great deal of money out there looking for acquisition targets. By ridding themselves of lesser-producing segments, larger manufacturers can focus more on and grow the units that are making them strong.
Some European divestments could make for interesting opportunities. Say that Nestle does divest its frozen foods and confectionery business. And Unilever casts off its food businesses as well. Suddenly, the brands representing about a third of the world's ice cream market are unmoored. And while Nestle's confectionery sales have been sluggish, the company has been working to innovate and bring some of its favorites more on-trend by reducing the sugar in formulations. And the company's claims of a new breakthrough in chemistry with hollow sugar molecules prove to be successful, Nestle's confectionery is in position to revolutionize the industry. So these once-slow-moving brands could potentially be targeted to make another company a new global force.
So far, 2017 has been pretty quiet on the M&A front, but analysts feel it’s just a matter of time before deals start falling into place. One a bit one happens, it will have a piggy-back effect across the industry.