Thailand’s richest man Dhanin Chearavanont is stepping down the aisle with US frozen meals firm Bellisio, entering a hyper-competitive market place.
On Thursday his flagship firm, frozen chicken producer Charoen Pokphand Foods, said it had agreed to buy Minneapolis-based Bellisio for $1.075 billion.
The move marks CP Food’s first step into the US, a market it has coveted for years given its size and technological edge in food manufacturing.
Owning Bellisio will also help CP Foods identify potentially global trends in consumer tastes - such as the shift towards healthier meals.
Adirek Sripratak, CEO of CPF, said in a statement that he plans to use Bellisio’s platform to sell Asian food products to US consumers.
According to a person familiar with the Thai firm's ambitions, CP Foods aims to use Bellisio as a platform for further US expansion.
"Given CP's global ambitions, the US was an essential part of the plan," the person close to CP said.
Established in 1990, Bellisio is outsized in the frozen ready meal shopping aisle by Nestlé, Heinz and ConAgra which wield bountiful financial resources and pricing power with suppliers.
According to research by credit ratings firm Moody’s the company's EBIT margins are thin and have been under pressure the last few years. Bellisio's purchase of Overhill Farms stretched the firm and it has suffered several power outages at its primary plant.
CP’s clout can only help Bellisio win more space on shelves and ballast against volatile commodity prices.
Tempting target
CP Foods had to beat fierce competition for private equity-owned Bellisio in an auction that kicked off in September. Rivals included a US and a Japanese food company.
Mid-sized US food manufacturers are trading at around 12 to 14 times earnings, and CP Foods paid a comparatively full valuation. However it was determined not to lose the opportunity to acquire a food manufacturer and distributer.
"It was right in the sweet spot of what the company wanted," said the person familiar with the CP Group. The Thai firm used cash from operations to fund the acquisition.
Bellisio, whose stable of brands includes Michelina’s, Boston Market, Chili’s, and Atkins, has four facilities located in Ohio, California and Minnesota. Bellisio has relationships with US retailers with over 50,000 distribution points.
Through its production facility in Jackson, Ohio, Bellisio is able to distribute its products to more than half of the United States within 24 hours and nationwide within 48 hours. Bellisio also has a presence in the Canadian single serve frozen entrees market.
CP Group is one of several food manufacturers looking to become global players, from Japan's Ajinomoto to Monde Nissin in the Philippines.
Overseas push
Following the death of the King Bhumibol Adulyadej over a month ago corporate finance experts told FinanceAsia that Thailand’s tycoons would continue to diversify their companies overseas as a hedge against political instability and to tap new growth markets.
Thai conglomerate Central Group, led by tycoon Tos Chirathivat, bought Big C’s Vietnam business earlier this year. TCC Group, a conglomerate controlled by Thai tycoon, Charoen Sirivadhanabhakdi secured Singapore-listed Fraser & Neave in 2013.
Dhanin controls Charoen Pokphand Group, an unlisted entity with stakes in a sprawling web of listed enterprises, including CP Foods, convenience store operator CP All and telco True Corp.
Just last month, a unit of CP Foods bought a 70% stake in Chinese animal feed producer and chicken meat processor, Fujian Sumpo Foods, for 1.7 billion baht.
CP Group was also one of the bidders for US hog producer Smithfield Foods back in 2013, but it lost out to China's Shuanghui International. CP Group acquired British bank HSBC’s 15.6% stake in Chinese insurance company Ping An Insurance for $9.4 billion in 2013. The deal was the biggest purchase by a foreign company in China.
CP Food’s said in its third quarter results that it generates 68% sales overseas and that in the long term its will bolster sales in Russia, India and the Philippines.
Centre Partners, a middle market private equity firm led by Bruce Pollack, acquired Bellisio in 2011.
For the 12 months ending September, Bellisio generated adjusted net sales of $668 million and adjusted EBITDA of $82 million. Bellisio's leverage, as measured by adjusted debt-to-EBITDA, was about 5.1 times for the twelve months ended January 3, according to Moody’s.
JP Morgan acted as exclusive financial advisor, and Davis Polk & Wardwell acted as legal counsel, to CPF for the transaction.
The transaction, subject to customary closing conditions and regulatory approvals, is expected to close within 180 days.
