Thai Union Frozen Products has agreed to buy Bumble Bee Foods from private equity firm Lion Capital for $1.5 billion in a deal that is expected to boost its revenues but could face keen scrutiny from US anti-trust regulators.
Bumble Bee, which was founded in 1899 by a handful of fishermen, is one of the top three canned tuna companies in the US. The other two are Starkist, which is owned by Korea's Dongwon group, and Chicken of the Sea, a distant third player, which Thai Union Frozen already owns.
If the deal is approved, this would mean that Thai Union controls two of the three largest US canned tuna companies. As such, according to one person familiar with the deal, the deal is likely to be subject to keen scrutiny from US anti-trust authorities.
“They are in a triopoly market, and Thai Union will own two of the three brands, so this will get a lengthy review from the US authorities,” said one person familiar with the deal. “The US anti-trust authorities don’t usually say no, but there might be production caps or they might have to divest a business,” he added.
The San Diego-headquartered Bumble Bee generates sales of about $1 billion and an estimated Ebitda of $145 million for 2014. Bumble Bee produces and sells canned tuna, salmon, sardines under brands including Bumble Bee, Brunswick and Sweet Sue, across the US and Canada.
Largest acquisition
Thai Union has been one of Thailand’s most acquisitive companies. Helmed by president and chief executive Thiraphong Chansiri, the company ventured overseas as early as 1997, when it bought a 50% stake in Chicken of the Sea and the remainder a year later.
Thiraphong has a reputation for bringing deals to the table, rather than waiting for bankers to approach him. Thiraphong's father, Kraisorn Chansiri, founded the business after emigrating to Thailand from Shantou in Southeast China. But it is was Thiraphong, his eldest son, who has steered the company from a sleepy cannery to a major tuna processor.
In 2010, it bought France's MW Brands for €680 million ($884 million) from Trilantic Capital Partners, the former private equity arm of Lehman Brothers. MW Brands owns John West, Mareblu and Petit Navire, popular brands in England, Italy and France.
In September, Thai Union bought French company MerAlliance and Norwegian seafood company King Oscar in two separate deals, both for an undisclosed sums of money. But this is its largest to date.
“The deal is the largest acquisition in the history of our company and one of the most exciting external growth propositions,” said Thiraphong Chansiri, president and CEO of Thai Union Frozen, in a release.
Synergies
Upon completion, the transaction will be immediately accretive to Thai Union Frozen’s earnings and cash flows and will increase Thai Union's group revenues by about 25%, Chansiri added in the release.
For Thai Union Frozen, ownership of Bumble Bee will mean it has an offtake arrangement with a buyer of fish and is in line with its ambitions to expand its own brand of canned food products.
"The company has been looking at downstream acquisitions for some time, in the canned food space, and this deal makes them more integrated," said the source familiar with the deal.
Including synergies between the two companies, the deal is valued at about 8.6 times 2014 estimated Ebitda, Thai Union said in the release. Excluding synergies, the deal was struck at a multiple of about 10.4 times.
Bumble Bee has changed hands a number of times, and Lion Capital bought it from another private equity firm Centre Partners for $980 million in 2010 and is exiting at a profit.
Thai Union will enter into a bridge loan with domestic banks of up to $1.5 billion. The closing of the deal is subject to clearance by the US anti-trust authorities. Bumble Bee and Thai Union Frozen expect the deal will close in the second half of 2015.
The food sector has been popular with Asian companies which have been active as buyers. In September, Japan's largest trading house Mitsubishi bought Norwegian fishery Cermaq for $1.4 billion. In 2013, Del Monte Pacific bought US canned food business of Del Monte Foods - a separate entity - from funds affiliated with KKR, Vestar Capital and Centreview Partners for nearly $1.7 billion.
UBS advised Thai Union Frozen. Morgan Stanley and Rothschild advised Lion Capital.
