Nomad Foods to Buy Birds Eye Owner, Iglo for US$2.79 Billion

April 22, 2015

Nomad Foods, launched a year ago by Martin E. Franklin and Noam Gottesman, is acquiring Europe’s largest frozen foods group, Iglo from private equity group, Permira for €2.6 billion (US$2.79 billion).

The timing of the deal is well-planned by Nomad as it enables the dollar-denominated company to capitalize on the growing strength of the dollar against the euro.

The acquisition of Iglo, which controls 30% of the European frozen food market, is just the first in a number of deals for Nomad as it maneuvers to transform itself into a branded business on a global scale.

The global branded food industry is undergoing a time of transition with the emergence of cost-cutting consolidators into the space such as Brazilian private equity firm 3G, which together with Berkshire Hathaway acquired Kraft Foods last month in order to merge it with Heinz. Groups like 3G have a widespread reputation for serial acquisition, massive cost-cutting and reducing operating costs, and their growing presence in the global food industry is having a major impact on existing players and the rate of consolidation in the space.

Permira bought Iglo from Unilever in 2006 for a price of €1.9 billion (US$2.04 billion), and through this transaction, is making 2.4 times return on its original investment. Under the structure of the deal, Permira will retain a 9% stake in Iglo in order to secure the benefits of further industry consolidation.

Despite Iglo’s sales falling by 2% in 2013 due to the divestiture of underperforming product lines, the company grew in eight of its twelve markets last year. The group also has a variety of new products in its pipeline including frozen breakfast foods, and whole grain fish fingers to capitalize upon consumer’s demand for healthier food options.

Iglo’s earnings before interest, tax, depreciation, and amortization (Ebitda) were $306 million in 2014, and its shares appear to be undervalued, trading at 8.5 times ebitda, compared to Pinnacle Foods, which is trading at 13 times ebitda. In the near future, it is expected that Iglo will see a premier listing on the New York Stock Exchange.

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