Universal Robina Corp (URC) is buying Griffin’s Foods for NZ$700 million (US$609 million), the latest Asian company bulking up to feed an expanding and more demanding middle class.
The Philippine snack foods firm, run by Lance Gokongwei the only son of one of the Philippines’ wealthiest men John Gokongwei who founded URC in 1954, is buying Griffin’s from Australian private equity firm Pacific Equity Partners (PEP).
URC, which produces the popular Jack n Jill branded snacks, cup noodles and biscuits, has expanded swiftly due to a growing appetite for convenience foods among Asia’s emerging affluent.
Lance said in a statement on Monday that he is acquiring the Auckland-headquartered firm partly because of its use of natural ingredients and traceable supply lines back to source. He called New Zealand: “a country trusted worldwide in having high credibility when it comes to food quality, safety and authenticity”.
Earlier this year in an interview with FinanceAsia Gokongwei said his group had the financial firepower to expand further by acquisition.
Chinese and other Southeast Asian firms have asked PEP whether it would sell Griffin’s, which makes biscuits, salty snacks and wrapped snacks, according to a person familiar with the matter.
PEP and Griffin’s kept their intentions carefully under wraps. PEP was particularly worried about negative publicity after it hired Goldman and UBS to auction Griffin’s in 2011 and failed to finalize an exit.
PEP began sifting through offers for Griffin’s again over the past few months and signed with URC over the weekend, the person familiar with the matter said.
The deal was struck at a multiple of about nine times ebitda over the last twelve months, the person said. Globally biscuit firms are selling for around eight to nine times LTM ebitda; while salty snacks have been selling for about nine times.
Greener pastures
The deal follows a spate of purchases of Australasian food and beverage companies by foreign firms attracted by the region’s reputation for healthy and safe food.
Also this year Wilmar agreed to buy Goodman Fielder for US$1.6 billion; the UK’s R&R Ice Cream bought Peter’s Ice Cream, also from PEP, for US$416 million. The value of acquisitions in the food and beverage sector are running at the highest level since 2011 according to data provider Dealogic.
Griffin’s owners have worked hard to keep Griffin’s supply lines and technology up to scratch. PEP acquired Griffin’s from France’s Danone in 2006. Prior to Danone Griffin’s was owned by Kraft’s Nabisco in the 1960s for close to 30 years.
URC feels confident enough of the products to export them over its distribution networks in the Philippines, Vietnam, Thailand, Indonesia, Malaysia, Singapore, Hong Kong and China.
URC is one of the fastest growing pan-Asean consumer plays according to a note by JP Morgan in April citing its strong domestic market in the Philippines and its expanding regional presence.
"In recent years URC has been looking for opportunities to explore potential acquisitions and partnerships in line with our vision to be a significant regional player in snack foods and beverages,” said Lance’s URC’s president and chief executive in Monday’s statement.
Under PEP Griffin’s established two manufacturing hubs in New Zealand and an international export division. Its brands are sold over 20 countries and Griffin’s generates over a third of its revenue abroad.
So far, investors have been supportive of Gokongwei’s expansion. In February, JG Summit, URC’s parent, raised Ps30 billion ($663 million) through a triple-tranche domestic peso bond, which was the largest peso bond since 2009 when San Miguel Brewery tapped the domestic bond market with a Ps38.8 billion bond.
JG Summit also raised $200 million through a share placement in November and another $280 million when it sold shares in URC last year.
PEP profits
PEP acquired Griffin’s for NZ$389 million eight years ago. It did however recap its purchase last year.
PEP and Griffin’s also invested over NZ$180 million into the operations of the company
Following the transaction the Griffin’s team will remain in place, with COO Alison Taylor stepping into the Chief Executive role.
URC is putting down NZ$100 million straight away and paying the balance on completion for the owner of brands including: Gingernuts, Cookie Bear, MallowPuffs, Eta Salty Snacks and Nice & Natural.
Founded in 1864, the company has 800 employees and generates about NZ$280 million in annual net sales.
Credit Suisse and First NZ Capital advised Griffin's. URC did not use financial advisers.
The deal is subject to approval from the Overseas Investment Office.
