Bright Food’s deal to acquire a 60% share of the global cereal giant for an enterprise value of €1.48bn was announced this morning. Lion Capital described it as the largest overseas acquisition by a Chinese company in the UK food and beverage sector.
Julian Wild, food group director at Rollits solicitors, told FoodNavigator it was one of a handful of acquisitions made by companies in India or China recently in the UK alone. “There’s a massive opportunity as the market in the Far East becomes more acclimatized to Western tastes. You are seeing it with Chinese and Indian companies. A lot of them are acquiring in the UK."
Similar recent examples
He pointed to India Hospitality’s purchase of the UK’s Adelie Food Group, which supplies sandwiches, salads and quiches for supermarkets and foodservice customers, for €267m last month. And Bangkok Ranch bought UK duck processor Cherry Valley in April 2010, he added.
Clive Black, research analyst at Shore Capital, said the move could represent the largest food industry deal brokered by a Chinese company in Europe. And he predicted more to come. “Capital is mounting in emerging markets and that gives a lot of companies out there the resource to buy a lot of knowledge and brand strength, which they don’t have because of the immaturity of these markets.
“From a nostalgic perspective it is understandable some will be disappointed at the prospect of China buying into the UK. On the other hand, British companies are not slow to acquire overseas and you have got to be able to take it as well as give it.”
Commenting on the fact that management continued to hold a 40% share of Weetabix alongside private equity outfit Lion Capital, Rollit said: “Management will have done well out of this. They will have been highly incentivized with a small stake.”
A significant proportion of shares had been retained by Lion Capital and management because a 100% buy out at this stage would have been a considerable risk for Bright Food, said Rollit. It would probably have wanted to retain significant involvement from the current management to ease the transition of ownership. “Either that or it was all Lion wanted to sell because it thought there was more potential for development in the company.”
Bright Food comment
Referring to Weetabix, Bright Food chairman Zongnan Wang said: “We are excited by the many growth opportunities for the business, especially in international markets, and Asia in particular. With Bright Food Group’s strong resources and our expertise in Chinese and broader international markets we are excellently placed to develop the Weetabix business.”
Weetabix chief executive Giles Turrell said: “While the company’s focus has been on reinforcing and building on our leading position in the UK, I believe there are also substantial opportunities to further grow the business internationally, in North America, Asia and beyond.”
Completion of the transaction is expected in the second half of 2012, said Lion Capital.