Ready Meals

No Plans for FRoSTA Sale, Says CEO Felix Ahlers

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While speculation has been circulating in the trade that German frozen food packer FRoSTA AG may be a target of acquisition-hungry Nomad Foods, CEO Felix Ahlers has made it clear that majority shareholders of the Bremerhaven-headquartered company have no appetite for cashing out.

The chief executive, who together with his father Dirk control 52.9% of FRoSTA stock, was quoted by Undercurrent News on December 9 as saying: “As a family, we have no plans to sell the company.”

FRoSTA, like Nomad Foods, is engaged in the production and marketing of a wide variety of frozen products ranging from fish, vegetables and fruits to pasta dishes and ready meals of all kinds. Unlike Nomad, a relative newcomer that was created as a frozen food company acquisition vehicle in 2014 by billionaires Noam Gottesman and Martin E. Franklin, FRoSTA has a long history in the frozen food industry that goes back almost 60 years. Even before Dirk Ahlers launched the brand in 1970, his family’s fish trawling business was the first in Europe to freeze fillet blocks at sea – aboard the stern trawler Sagitta in 1957.

While Germany is FRoSTA’s main market, the company exports both branded and private label products throughout continental Europe, the UK and beyond. Sales during the first four months of 2015 were up 7%, while turnover the previous year rose 5% to EUR 408 million. Consolidated net income increased to EUR 17.3 million, compared with EUR 12 million the previous year. The equity ratio edged up to 53.5%, compared with 52.5% in 2013.

The uptick was largely attributed to brand sales in Germany, which registered a 15% gain in value. The positive development was primarily driven by successful new product launches, such as fish gourmet fillets (Schlemmerfilets). In addition to banning the use of additives and artificial flavorings, a commitment to transparent country of origin labeling of ingredients continues to pay dividends 11 years after the adoption of Reinheitsgebot (purity law) standards for FRoSTA’s extensive product line.

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Tortola, BVI-headquartered Nomad Foods, meanwhile, became the largest frozen food company in Europe earlier this year following the acquisition of London-based Findus Sverige AB and its subsidiaries from LionGem Sweden 1 AB, a company backed by a group of investors including Highbridge Principal Strategies, Lion Capital LLP and Sankaty Advisors, for approximately £500 million. Consummation of the deal expanded an already impressive portfolio of iconic brands that include Iglo and Birds Eye.

The most recent acquisition included Findus Group’s continental European businesses in Sweden, Norway, Finland, Denmark, France, Spain, and Belgium, as well as the intellectual property and commercialization rights to the Findus, Lutosa and La Cocinera brands in the respective markets. The acquired operations include approximately 1,500 employees and six manufacturing facilities.

Through this transaction, Nomad now commands leading market share in nine countries (UK, France, Sweden, Germany, Italy, Austria, Belgium, Portugal, and Spain). The acquisition reunites Nomad’s existing Findus-branded business in Italy with the brand in other key geographies, strengthening overall presence across the European continent. Including the acquired Findus businesses, Nomad employs over 4,300 people in 15 countries, with 10 factories, and a broad portfolio of product offerings. This scale and reach will help the company execute on its innovation strategies while using consumer insights to tailor its offering for local markets.

In a presentation to investors over the summer, 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.

The company continues to seek out what CEO Stéfan Descheemaeker Descheemaeker describes as “neglected frozen food brands.”

While FRoSTA brands are surely not neglected, the company is certainly successfully engaged in niche markets, has a long history of free cash flow generation, and has strong management in place.

Nomad Foods, meanwhile, posted third quarter financial results that showed a sales decline of 8.4% to EUR 315.5 million. Earnings before interest, taxes, depreciation and amortization fell 9.1% year on year to EUR 64.6 million. The downturn was largely attributed to a challenging environment beset with price cutting pressure from discount retailers.