Barilla set to sell German retail chain to investors

By Jane Byrne

- Last updated on GMT

Related tags Investment Kohlberg kravis roberts Barilla

Leading Italian pasta maker Barilla is to sell off its German bakery chain Kamps to Equity Capital Management (ECM), a private equity group that invests in small and mid-size business.

Barilla acquired the Kamps Group for €1.8bn following a hostile takeover in 2002. The group includes bread manufacturing and distribution holdings in both Germany and France and other retail businesses, and the Italian firm established Lieken as a holding company for all of Kamps assets.

The company said the transaction is not subject to approval by competition authorities and should be signed off soon, but it did not disclose the value of the deal with ECM.

Kamps is Germany's largest single brand bakery chain with over 900 retail units nationwide, and in 2009 Lieken had earnings of €1bn, with the retail chain accounting for €300m of this.

But Barilla is said to view the retail chains as not core to its business and the deal with ECM follows a previous failed attempt by the Italian firm to sell Kamps for around €100m in 2008. Industry insiders, at the time, said no other German bakeries had the financial or managerial resources to take Kamps over

Bread sales

According to media reports, Barilla will retain the company's industrial bread unit, which now generates the majority of the bakery's sales.

Rabobank’s food and agriculture analyst Sapna Naik told that bread was the strongest performer in the bakery sector in 2009 in Germany with a growth rate of two per cent. While volume was down, value was higher and sales of wholegrain, multigrain and rye breads in particular are fuelling buoyancy in the category, she added.

Germany has the biggest consumption of bread in Western Europe. Rabobank puts the value of the sector at around €9.3bn, with unbranded private label bread accounting for 24 per cent of that and artisanal bread having a 54 per cent market share.

Factors such as increased at-home consumption and a consumer shift in preference for staple products during the economic slow down have also been drivers in the category’s resilience, said Naik.

Private equity involvement

ECM also has Swiss food company Kadi in its portfolio. Rabobank, in a report out last year, predicted a flurry of acquisitions in the bakery sector by private equity investors. Meanwhile, speculation concerning the divestment or acquistion of manufacturers by such groups have been dominating headlines in the wider food sector in recent months.

Last month saw the sale by Kraft of its Kandia-Excelent chocolate, sugar confectionery and cake business in Romania to Oryxa Capital, an international investment fund.

Nicholas Hill, a spokesperson for Oryza, told our sister site that the group aimed to expand the Kandia-Excelent business, with one of its future goals being to export the Romanian sweet maker's brands to other European markets.

And the private equity owners of UK manufacturer United Biscuits (UB) are said to be interested in divesting of the business. The Blackstone Group and PAI Partners, which bought the manufacturer for £1.6bn in 2006, are reportedly sounding out investment firms for advice regarding an auction in the autumn of the Jaffa Cakes maker.

UB saw good performance last year with revenues of £1.26bn but had a tougher time of it in 2010 with aggressive targets set by its owners. Analysts see a split between the biscuit and snack divisions as a viable option.

“It would be feasible to split the biscuits business which is quite international (McVities plus the European biscuit brands such as Delacre, BN, Verkade) from the more UK orientated snack business (McCoys, KP, Hula Hoops),”​ said Leatherhead Food International market analyst Chris Brockman.

And PAI Partners is said to also be in discussion with investment banks about a possible sale of the French dairy giant Yoplait.

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