M&A round-up: October/November

Related tags Bunge north america Mergers and acquisitions Danisco

It has been a bumpy ride over the last few months for mergers and acquisitions. The global credit crisis has cut into financing opportunities, while some high-profile deals have been stalled or even terminated.

In November Bunge announced that it would terminate a merger agreement with Corn Products International (CPI) following a decision by CPI’s board to withdraw its support for the deal.

The $4.8bn agreement, which was announced in June, was expected to move Bunge closer to becoming the second largest agribusiness in the world, whilst expanding CPI’s product portfolio.

But it was thrown into turmoil when CPI’s board of directors notified Bunge of its intent to withdraw its recommendation in favor of adopting the previously announced merger agreement, and instead recommend against it.

However within days Bunge North America announced that it had purchased corn dry mill assets and the Ceratex line of specialty products from JR Short Milling Company, to increase its customer base and boost its capacity in the US.

The North American arm of Bunge Limited said it hoped the expanded line of products would drive new business, while the acquisition of an additional plant would help the company better serve its customers in the brewing and snacks industries.

Danisco – Nordzucker

Across the Atlantic, the German competition watchdog has extended its probe of the Danisco deal to spin-off of its sugar arm to Germany's Nordzucker.

In July this year the Danish ingredients group announced it would sell its sugar division to Nordzucker as part of Danisco's strategy to evolve into a "focused, bio-based, market-driven ingredients provider"​.

But it faces delays of at least three months after the Federal Cartel Office in Bonn revealed in October that it would take its review into a second phase, opting to investigate the €750m takeover further.

The move came as no surprise to a Danisco spokesperson who told FoodNavigator.com: "Given the size of the deal, we expected this."

Credit crisis

Consolidation in the food industry in general appears to be shifting down several gears as the global credit crisis cuts into financing opportunities for M&A activity and cash-rich firms with strong balance sheets sit and wait.

Banks hit hard by the credit crisis are no longer in a position to back loans to finance the deals and trade players are hanging onto their cash to ensure they are in a strong position as they "wait and see how the market develops".

"Today it is very, very difficult to borrow money in the debt-market, it has all but dried up,"​ says Peter Seary, a corporate partner at Shoosmiths solicitors that specializes in M&A in the food sector.

InBev - Budweiser

Meanwhile, InBev says it will divest its responsibility for partially owned Canada-based brand Labatt to clear its $52bn acquisition of Budweiser brewer Anheuser-Busch.

As part of an antitrust clearance from the US Department of Justice (DOJ), the brewer says it will agree to grant an independent third party exclusive license to produce Labatt’s brands such as the Blue and Blue light beers.

The group says that it will also sell off the Labatt USA group, responsible for the import marketing and sale of the brand in the country, to the licensee.

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