Nomad Foods Ltd has now set its sights on bargain buys in the United States, according to a Reuters dispatch. Having made a binding offer to acquire continental Europe frozen food operations of the Findus Group for £500 million ($781 million) on August 13, after purchasing Iglo Foods Holdings (including the iconic Birds Eye brand) for EUR 2.6 billion ($2.9 billion) in June, the Tortola, British Virgin Islands-headquartered investment vehicle appears to be rolling its way to fresh pastures for capital deployment on the other side of the Atlantic.
Reuters reported on August 18 that Nomad CEO Stéfan Descheemaeker said, in essence, that the company is seeking “to buy neglected frozen food brands on the cheap and breathe new life into them.”
There are a number of major frozen food players on the market – both declared and undeclared – in North America at the moment. Among them is Belliso Foods, a Minneapolis, Minnesota-headquartered ready meals and snacks maker that generated approximately $600 million in sales last year. It specializes in packing branded and private label products, in addition to foodservice fare. According to Wikipedia, the company produces more than 400 products and is ranked as the No. 3 packer of frozen entrees in the USA.
Another Minneapolis-headquartered operation, the Green Giant frozen and canned vegetable business owned by General Mills, is reportedly on the block. Villeneuve d’Ascq, France-headquartered Bonduelle SA is said to be keen on buying the unit.
Nomad Foods was founded in 2014 by billionaires Noam Gottesman (founder and ceo of TOMS Capital) and Martin E. Franklin (co-founder and chairman of Jarden Corp., a diversified consumer products company with annual sales of over $8 billion). Its shares, listed on the London Stock Exchange as NHL, have more than doubled in value during the past year. A steady uptick since the first quarter of 2015 has seen the stock rise from approximately $10 in March to $21.50 as this story was filed on August 19. Market capitalization is $3,671 million.
Fellow billionaire investor William A. Ackman, who manages the New York-based Pershing Square Capital Management hedge fund, acquired a 19.6% voting rights stake by buying 33,333,334 ordinary shares of Nomad Foods Limited stock on July 14. Speaking during an investor conference before the purchase, he said that Nomad’s anchor investment in Iglo would be used as “a base for future food industry acquisitions.”
In a presentation to investors made in July, Nomad Foods spelled out that it is looking for leading companies in niche markets with strong management organizations in place. Additionally, acquisition candidates must have a long history of strong free cash flow generation and attractive valuation against cash flows. This was the criteria and approach in targeting both Iglo Group and Findus assets.
“Numerous opportunities exists across the US and Europe to increase footprint in frozen foods,” states the company’s presentation. “Nomad Foods is well positioned to lead broader food consolidation and build a best in class global foods company.”
The investment in Europe certainly seems to off to a good start. The combination of acquired Iglo and Findus brands would give it an almost 15% share of the European frozen food market, which is valued at $52 billion ($39 billion in the West and $13 billion in the East), according to Euromonitor statistics. The business intelligence research house places the next three top brand players in the highly fragmented sector, which has been eroded during the past decade due to gains made by private labels and store brands, as follows: Dr. Oetker, 4.7%; Nestlé, 4.3%; McCain Foods, 3.3%.
The Feltham, UK-headquartered Iglo Group last year rang up EUR 1.466 billion in sales of frozen products that ranged from vegetables and fruits to ready meals, side dishes, fish and seafood specialties, pizza, snacks, desserts and other convenience items.
During the first half of 2015, Iglo Group net sales are estimated to fall 2.4% to EUR 743.1 million, with revenues decreasing 6.1% on a constant currency basis. This is in line with expectations made by Nomad Foods at the time of its acquisition of Iglo. The reason cited for the decline is “a tough retail environment driven by heavy discounting by retailers.”
