Consumer Sector Comment – November 2015

Date

Muscling into sports nutrition…

High growth in consumption of sports nutrition products continues to drive interest in the sector, particularly from strategic buyers. Dairy companies have long been attracted by the synergies offered through production of whey.

This summer, Irish Dairy cooperative Aurivo was the latest dairy player to make a move into the sector, acquiring UK-based For Goodness Shakes in a €28 million transaction. For Goodness Shakes was established in 2003 in London by entrepreneurs and competitive sportsmen Stuart Jeffreys and Jeremy Martin. The Company’s dairy-based protein brands are widely available through leading supermarket chains, in addition to specialist sports and leisure outlets across the UK. For Goodness Shakes focuses on selling recovery and protein ready-to-drink (“RTD”) brands – the RTD category is seeing particularly high levels of growth, as the supplements category increasingly targets mainstream users who seek additional convenience.

Another Irish dairy group, Glanbia, has long been an active acquirer in the sector as it seeks to increase its coverage of different geographic markets, product categories and distribution channels. In 2014, the group acquired Danish company Nutramino, with Clearwater International advising the shareholders, to take it into the Scandinavian market and later the same year, acquired Isopure in a move to increase its exposure to the fast-growing RTD category.

It’s not just dairy groups attracted by high growth in the supplements sector. More traditional food players have also looked to move into higher growth sub-segments:

  • US food group Hormel, better known for Spam and other meat-based products, acquired Cytosport, owner of the famous Muscle Milk brand;
  • Post Holdings, another food group which traditionally focused on cereals, acquired Power Bar from Nestlé as part of a portfolio reorganisation; and
  • Most recently, privately owned food group Samworth Brothers of the UK acquired sports nutrition brand Sci-Mx which has a growing presence in grocery retail.

Increasingly, we are seeing other players also looking to broaden their product portfolios with complementary brands – B&B Investments-backed brand PHD Nutrition acquired online brand Protein Works as it attempts “to create a pan-European sports nutrition group which addresses key consumer needs and channel opportunities”.  Here at Clearwater International, we expect no let up in M&A as new players enter the market, attracted by the growth prospects, and existing players add to their brand portfolios across product categories, geographies and distribution channels.

September was a busy month for Clearwater International with two more consumer deals completed, taking the total for the last twelve months to 10.

  • Private equity funds managed by Blackstone announced the acquisition of Ideal Shopping Direct (“ISD”), a leading independent multi-channel retailer, from Inflexion. Clearwater International advised the management of ISD on the deal. ISD operates live and pre-recorded channels across all the major UK TV platforms. Its two principal divisions are Create & Craft and Ideal World.
  • Clearwater International advised Playnation, a leading UK supplier of amusement and entertainment machines, on its cross-border sale to Novomatic Group, one of the largest integrated conglomerates of the international gaming industry.

 

Selected UK Consumer Deals

Mayfair Equity Partners has acquired an undisclosed majority stake in Fox International Group Ltd, a supplier of fishing tackle, from Next Wave Partners for a total consideration of €70 million.

Piper Private Equity has invested €8.2 million in natural pet food manufacturer Forthglade Foods.

LDC has backed the management of Aqualisa Products Ltd, a manufacturer of digital, thermostatic, and electric showers, in an MBO from Sankaty Advisors and Royal Bank of Scotland.

Card Factory founder Dean Hoyle and Tony Barraclough acquired an undisclosed significant stake in The Works Stores Ltd, a retailer of books, toys, gifts, stationery, craft products and games. Hoyle will become chairman of the Works.

Listed manufacturer, supplier and distributor of design-led carpets Victoria plc has agreed to acquire Interfloor Group Ltd, a manufacturer of carpet underlay, for a cash consideration of €90 million.

PE firm Wessex Bristol has acquired Fairline Boats Ltd, a manufacturer of luxury yachts, from Better Capital.

Conviviality Retail plc has entered into a definitive agreement to acquire Matthew Clark, a wholesaler and distributor of alcoholic drinks and bottled water, from Punch Taverns plc and Hertford Cellars Ltd.

Danish tobacco company Mac Baren Tobacco Company A/S – a subsidiary of Halberg A/S, a Danish family-owned company – has agreed to acquire the fine cut and pipe tobacco brands business of Imperial Tobacco Group Plc.

Ardian portfolio company ADA Cosmetics International GmbH, a German supplier of hotel cosmetics, has acquired Pacific Direct Ltd, a supplier of branded guest toiletries, from Primary Capital.

EME Investments Ltd (an acquisition vehicle set up by Brain Souter, Ann Gloag and Perscitus Advisers, the family office of Jon Moulton) has acquired a majority stake in Clive Christian Ltd, a luxury interiors and perfume brand.

Cox & Kings India Ltd has acquired online hotel booking agency Late Rooms Ltd from TUI AG for a total consideration of €11.6 million. Late Rooms generated revenues of €68.5 million for the financial year ending September 2015.