Norwegian conglomerate Orkla is to buy the family-controlled foods group Rieber & Soen for 5.18 billion crowns ($871 million), paying a 78% premium to the market price to expand its core branded consumer goods business, Reuters reported Monday. Orkla said on Monday it has agreed to pay 4.67 billion crowns or 66.58 crowns a share in cash for the Rieber founding family’s stake of 90.11 percent and will buy out minority shareholders at the same price, which together with net debt gives the 173-year-old firm an enterprise value of 6.1 billion crowns ($1.03 billion).
(Reuters) – Norwegian conglomerate Orkla is to buy the family-controlled foods group Rieber & Soen for 5.18 billion crowns ($871 million), paying a 78 percent premium to the market price to expand its core branded consumer goods business.
Supplying grocery stores in the Nordic countries, parts of Central Europe and Russia, Rieber’s brand portfolio includes Czech food maker Vitana, Nordic condiment maker K-Salat, Polish dessert firm Delecta and Russian nuts maker Chaka.
Orkla said on Monday it has agreed to pay 4.67 billion crowns or 66.58 crowns a share in cash for the Rieber founding family’s stake of 90.11 percent and will buy out minority shareholders at the same price, which together with net debt gives the 173-year-old firm an enterprise value of 6.1 billion crowns ($1.03 billion).
Orkla, which owns a variety of businesses from hydropower generation to extruded aluminium profiles and paint, has focused its recent acquisitions on branded consumer products, aiming to streamline and refocus its once sprawling empire that also includes a property and financial investment company.
Earlier this year it purchased oral hygiene firm Jordan while last year it sold industrial firm Elkem and a bakery firm Bakers as part of this strategy realignment.
“With this acquisition, Orkla expands its product portfolio and gains strong market positions in categories that are entirely new to us.” Chief Executive Aage Korsvold said. “We have no problem calculating a profit from this. The deal is accretive to our earnings.”
The company said it is also planning further transactions, although its future acquisitions are likely to be much smaller. Its next deal could be the sale of chemicals arm Borregaard, which produces chemicals and biofuels using timber.
The Borregaard negotiations are at an advanced stage and a deal could be done before the end of the year, either through an initial public share offer or a trade sale, the company said.
Despite the premium, Orkla rejected suggestions it was overpaying for Rieber & Soen, saying the firm’s stock market price was not a correct indicator of value.
“When 90 percent of shares are held by the family, the stock market pricing isn’t all that relevant,” Orkla’s chairman and top shareholder Stein Erik Hagen told Reuters. “We’ve done the calculation and concluded this is a price we can defend.”
Analysts said the deal may be on the expensive side, but Orkla bought a solid business.
Last year Rieber made an underlying profit before interest, tax, depreciation and amortisation of 464 million crowns on sales of 4.3 billion with 59 percent of its workforce of 2,900 working outside Norway.
The firm has undergone a rapid expansion in recent years but its margins have come under pressure, particularly in central Europe as it has proven to be still too small to compete.
“We believe that an Orkla that focuses on brands is a good mother to our businesses,” Fritz Rieber, the family’s representative said. “We want to contribute to the creation of a strong Nordic food company that can compete with the biggest global players.
“Together, Rieber & Soen and Orkla will be the leading Nordic food manufacturer, with the expertise and resources to develop strong local products and brands in competition with international players,” Korsvold said.
“You don’t get to buy an old and solid company like Rieber without paying for it,” said Kenneth Sivertsen, an analyst at Arctic Securities.
“Rieber has traditionally had a margin around 11-15 percent … it is a solid market-leading company.”
“At first glance the price is a little higher than I would expect but there should be ample opportunity to realise cost synergies in Norway, and there’s also revenue synergies outside Norway,” said SEB Enskilda analyst Atle Vereide.
Orkla’s shares were up 0.5 percent at 43.22 crowns by 0940 GMT on Monday while Rieber’s shares jumped 72 percent to 64.50. Orkla said it would n
Brokerage ABG Sundal Collier advised the Rieber family while Orkla used no external advisers. ($1=5.9468 Norwegian krone) (By Joachim Dagenborg and Balazs Koranyi; Editing by Greg Mahlich)