Big hit­ters in the meat in­dus­try flex their

Irish Independent - Farming - - FINANCE - JAN FITZELL

MERG­ERS and ac­qui­si­tions (M& A) ac­tiv­ity in­volv­ing par­tic­i­pants in the Ir­ish meat pro­cess­ing sec­tor has con­tin­ued apace in 2017 with the con­clu­sion of some no­table deals.

This is in spite of the ob­vi­ous un­cer­tainty wreaked on the in­dus­try and on M&A deals gen­er­ally by Brexit.

While there are myr­iad rea­sons un­der­pin­ning this M&A ac­tiv­ity, a num­ber of com­mon themes are ev­i­dent.

First and fore­most is the con­tin­ued push for scale. In an in­dus­try where op­er­at­ing mar­gins are tra­di­tion­ally tight, top-line growth is crit­i­cal for meat pro­cess­ing busi­nesses to grow and pros­per.

In a West­ern­ised, de­vel­oped econ­omy such as Ire­land, growth by ac­qui­si­tion will of­ten out­strip or­ganic growth in this sec­tor in terms of pace, and hence busi­nesses are at­tracted to pur­chas­ing other play­ers in the sec­tor as a means to achiev­ing scale.

Scale also fa­cil­i­tates ad­di­tional cost ef­fi­cien­cies, which is an­other ma­jor mo­ti­vat­ing fac­tor be­hind many M&A deals.

Re­cent deals in the do­mes­tic meat sec­tor in Ire­land in­clude: the pur­chase of Wil­bay Ltd, a lead­ing meat wholesaler based in Laois, by Mon­aghan-based sausage pro­ducer Arthur Mal­lon Foods in 2016; and the ac­qui­si­tion by Kil­dare­based cooked meat pro­ducer O’Brien Fine Foods of Meath-based Faughan Foods, from Ho­gans Tur­keys in 2017.

How­ever, with the size of the Ir­ish mar­ket and com­pe­ti­tion reg­u­la­tion act­ing as a con­straint on growth by do­mes­tic ac­qui­si­tion for some play­ers, busi­nesses have sought to ac­quire in­ter­na­tional op­er­a­tors as a means to sat­isfy their growth as­pi­ra­tions.

A re­cent Ir­ish suc­cess story in France was the ac­qui­si­tion by Ca­van­based Lif­fey Meats of a ma­jor­ity share­hold­ing in the French meat pro­ces­sor Ch­i­ron Vian­des, which spe­cialises in pro­duc­ing frozen ham­burg­ers for su­per­mar­kets.

The Euro­pean Com­mis­sion has also cleared un­der the EU Merger Reg­u­la­tion the pro­posed ac­qui­si­tion of joint con­trol over UKbased Lin­den Foods by ABP Food Group and Fane Val­ley.

ABP Food Group, the in­ter­na­tional meat, pet food and re­new­ables business, re­cently ex­panded its op­er­a­tions in Poland with the ac­qui­si­tion of a third pro­duc­tion fa­cil­ity in east­ern Poland.

We have seen for­eign meat-pro­cess­ing com­pa­nies look­ing to the ex­per­tise of es­tab­lished Ir­ish op­er­a­tors to im­prove their busi­nesses.

Groupe Ter­rena, the co-op­er­a­tive group and owner of French pro­ces­sor Elivia, saw the ben­e­fits of bring­ing in Ir­ish­head­quar­tered Dawn Meats as a part­ner to its beef pro­cess­ing business.

This ref lects Dawn’s ex­cel­lence in the global in­dus­try and the in­ter­na­tional recog­ni­tion of Ire­land’s ex­per­tise in grass-based meat pro­cess­ing. We would not be sur­prised to see fur­ther in­ter­na­tional ac­tiv­ity in this vein.

The re­cently an­nounced strate­gic part­ner­ship be­tween Dawn and North­ern Ir­ish meat giant Dun­bia, which has just been granted reg­u­la­tory clear­ance, will pro­vide Dawn with a Brexit buf­fer through Dun­bia’s con­sid­er­able UK pres­ence

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