Meat sector deals strong in 2017

Meat sector financial deals have stayed strong this year, with Karro Food Group and Westbridge Food Group the main purchases up to the end of August, according to financial adviser Oghma Partners. 

Aside from the purchase of Moy Park by US processor Pilgrim’s Pride, which was announced earlier this month, top meat industry mergers and acquisitions have clocked up £240m so far this year. That represents the second-largest amount of cash exchanged within a single sector.

In the breakfast cereal category, the single acquisition of Weetabix by Post Holdings, which was valued at £1.4bn, outweighed this, even factoring in the £1bn Moy Park takeover. This latest deal does not appear in Oghma Partners’ UK Food & Beverage M&A Review, which only covers the period to the end of August this year.

The total value of meat industry deals to date this year is more than double that in 2016, when deals totalled just £92.2m. This sizeable increase in the value of mergers and acquisitions in the meat industry runs contrary to the overall pattern observed in the wider food and drink industry in terms of deal volumes.

In its report, Oghma Partners noted: “The marked slowdown in volume seen in the first four months of the year has continued… Is Brexit starting to impact on UK companies’ decisions to engage in M&A activity? Deal value for T2 [May to August] 2017 only amounted to £300m, versus £600m for T2 2016. Value is significantly down on previous years and, like the volume level, is at its lowest point since T2 2013.”

Despite declining activity in the overall food market, Oghma Partners noted that the level of activity from overseas investors had increased. One possible explanation was the weaker value of sterling, giving international players more buying power, it said.

Commenting on the overview of the whole food and drink sector, Mark Lynch, partner at Oghma Partners, said: "In retrospect 2016 appears to have been an above trend year with circa 120 deals completed in the period. 2017 is on track to deliver circa 80 deals on a par with the 2012-2015 period.

"The other stand out feature of the review is activity by overseas companies, or the UK subsidiaries of overseas companies, which has increased to account for 42% of transactions year-to-date vs c. 35% in 2016. The sharp decline in sterling over the last twelve months has made UK assets 20%+ ‘cheaper’ in Euro’s slightly less so in dollars and may account for the increasing importance of foreign buyers."

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