Acquisitions in food and beverage sector tops $3.4b

MUSCAT: Food and beverage sector merger deal value for 2016 surged to more than $3.4 billion, from just $402 million the previous year, according to Mergermarket, the leading provider of merger and acquisitions (M&A) data and intelligence.

The total deal value for the year was the highest since the data provider first reported on the sector’s M&A landscape in 2009. Four deals in the consumer sector have been announced so far this year worth $104 million with a strong pipeline predicted for 2017. The data was announced at Mergermarket’s Middle East and North Africa (MENA) Mergers 2017 forum, which took place in Dubai on 8 May.

Deal value in the Food and Beverage subsector so far this year has been driven by consumer giant, Nestlé’s, acquisition of Caravan Marketing Company, a leading Egyptian instant coffee company and owner of the Bonjorno brand, for $33 million. The acquisition reflects Nestlé’s ambition to invest in Egypt and the fast development of a rapidly growing soluble coffee segment which has been gaining popularity in the region.

Another headline hitting deal to watch is Brazilian meat producer, BRF’s, sale of a stake in its halal food unit, One Foods, which could be worth an estimated $5 million.

Interest in the asset dropped following Brazilian police reports revealed a criminal investigation of the country’s meat industry. The stake may be targeted by Saudi Agricultural and Livestock Investment and the sovereign wealth funds, Abu Dhabi Investment Authority and Qatar Investment Authority.

Ruth McKee Al Ghamdi, Head of Mergermarket MENA, said: “Food and beverage continues to be a hot sector for M&A in the MENA region. In an era of low oil prices, challenging economic conditions and stiff competition, thriving businesses are highly sought-after by corporates and private equity firms. A number of successful concepts are expanding throughout the region through opening companyowned locations or franchising. Most deals in this space will likely be seen in UAE, Saudi Arabia and Egypt.”

Following a slow start to 2017, M&A deal activity in the sector is expected to pick up in the second half of the year. Mergermarket intelligence suggests that a further flurry of small-cap deals are expected including Emirates Modern Poultry Co (Al Rawdah), who are mulling over a $20-30 million joint venture in Kuwait and Oman to increase their export capabilities.

In March, Mergermarket reported that Lebanese food chain Shawarmanji was in advanced discussions with a private equity firm over a stake sale. Shawarmanji has signed franchise agreements to launch 50 outlets in Saudi Arabia in the next seven years, with discussions to open further franchises in Oman and Egypt and plans to enter Europe by the end of 2018.