Birds Eye, the maker of fish fingers and frozen peas, has been sold in a €2.6bn (£1.9bn) deal by Permira, the private equity firm, to a pair of US tycoons.
The sale to Nomad Foods comes on the back of a wave of consolidation in the food sector and marks the end of Permira’s eight year ownership of Birds Eye’s parent Iglo .
Nomad was listed in London as a $500m cash shell last August by Martin Franklin and Noam Gottesman with the aim of creating a global consumer brands business.
Mr Franklin is widely-known in America for building up US food group Jarden from a $120m jar maker to a $10bn company through a series of acquisitions, while Mr Gottesman founded London-based hedge fund GLG partners before selling it to Man Group in 2010. Nomad is understood to have approached Permira in April about using a Birds Eye takeover as the building blocks for a global business.
“This is a well-run business that has cemented itself as a leader in an attractive, yet highly fragmented sector, which paves the way for both organic and inorganic growth opportunities”, Mr Franklin said.
Nomad is raising a further $750m via a share placing to fund the all-cash takeover of Birds Eye, which values Europe’s largest frozen food business at around eight times its earnings. Iglo recently reported €1.5bn of revenues and earnings of €306m for 2014.
The deal with Nomad, is a win for the private equity house which has previously struggled to sell the company it bought from consumer goods giant Unilver for €1.76bn in 2006. Private equity firms typically hold investments for around five years, making Permira’s ownership tenure unusual.
“Private equity is predicated on buying businesses and then selling them again”, Cheryl Potter, head of Permira’s global consumer team, said. However, she maintained that Permira had an acquisition strategy for the business and an alternative stock exchange listing plan for the company would have supported further bolt-on acquisitions.
The private equity firm, which is keeping a 9pc stake in Nomad Foods as part of the deal, had run an auction to offload the business in 2012 but rival private equity firms BC Partners and Blackstones’ offers fell short of Permira’s €2.8bn asking price at the time. Ms Potter said that in 2012 there had been concerns that the Euro was “about to fall apart and there had been a lack of optimism” which had skewed the sale process.
One year later, Birds Eye was hit by the horse meat scandal after its Bolognese and lasagne ranges were found to have traces of contamination. Ms Potter said that the business was not as adversely affected as its frozen food rivals as its mince meat products generate only a fraction of the company’s sales. However, industry bankers said that the negative publicity impacted the timing of any sale.
Iglo, which controls 19.5pc of Western Europe’s frozen food market, has benefited from frozen food’s improved reputation. “Frozen food, which has long been tarnished by the unfortunate “junk food” label, has started to be seen as a healthier alternative to canned or chilled food”, Pinar Hosafci, food analyst at Euromonitor said. Ms Hosafci added that Birds Eye, which first invented the fish finger in 1955, was also appealing to customers with new ranges and innovations.
“What people eat and how and when they eat are constantly evolving, making food one of the most resilient yet dynamic categories in the consumer sector”, Mr Gottesman said.
Brds Eye was founded after Clarence Birdseye, an American explorer and scientist, pioneered flash freezing as a way of preserving food.
Captain Birds Eye, the bearded sea farer, boosted the company’s popularity during the 1970s however Martin Glenn, now chief executive of the Football Association killed off the mariner during his time as chief executive of the company in favour of a polar bear named Clarence. Around 1.5m fish fingers are still sold every day.
Elio Leoni Sceti, Iglo chief executive, said he would leave Birds Eye to take up another role but would remain as a non-executive director at Nomad. Nomad said it would start the search for a new chief executive.
Centerview is advising Permira on the deal, while Nomad Foods has turned to Barclays and UBS.
The food sector has seen a rash of deals over the past year with Heinz recenlty acquiring US snack foods business Kraft. It is also understood that China’s Bright Foods is looking to buy the rest of cereal maker Weetabix from Lion Capital in a deal that would see Baring Private Equity Asia take a 40pc stake. Baring last year snapped up floral accessories group Cath Kidston.
By Ashley Armstrong