Analyst reaction to transaction
Mondelēz sells part of gum business to rival Perfetti Van Melle for $1.3bn
The deal will allow Mondelēz to focus on growth and reinvestment in its core chocolate, biscuit and baked snacks categories.
“As we continue progressing our Vision 2030 focus and acceleration strategy, doubling down on our core snacking categories, we are pleased to transition our developed market gum business to a values-led, family-owned company whose portfolio is a strategic fit, and where our brands and people can thrive,” said Dirk Van de Put, Chairman and CEO, Mondelēz International.
The sale includes manufacturing facilities in Rockford, IL and Skarbimierz, Poland and the gum brands Trident, Dentyne, Stimorol, Hollywood, V6, Chiclets, Bubbaloo and Bubblicious in the United States, Canada and Europe, as well as the European candy brands Cachou Lajaunie, Negro, and La Vosgienne.
Mondelēz International will continue to operate its gum business outside the United States, Canada and Europe, led by Stride in China, as well as all of its other candy brands and products.
Perfetti Van Melle Group is a leading European gum and confectionery maker and the acquisition will complement its portfolio that includes iconic global brands such as Mentos, Chupa Chups and Alpenliebe.
“Perfetti Van Melle will be an excellent home for the management team and employees of Mondelēz International’s gum business in North America and Europe,” said Egidio Perfetti, Chairman of Perfetti Van Melle Group.
Mondelēz International’s Vision 2030 strategy aims to generate 90% of revenue in chocolate and biscuits, including baked snacks - categories identified with significant growth opportunities for the Company - up from 59% in 2012 and 80% today.
"While this move is not surprising, we still see both the strategic and financial implications as incrementally positive', said Andrew Lazar, Senior Analyst - Packaged Food at Barclays.
“From a strategic standpoint, we see this divestiture as growth-accretive while also enabling greater focus on growth and reinvestment in MDLZ’s core chocolate, biscuit, and baked snacks categories. Sales for this asset were declining at an -11% CAGR between 2016-19 before falling at a much more significant rate during 2020 due to the impact of COVID-19. All said, sales for this business in 2021 were ~$450mm, though we believe they were likely $100mm or so higher prior to the pandemic.
“While sales are likely to be up slightly YOY this year, it is off a depressed base and largely a function of recovery move than anything else. By our math, we estimate this business was about a -25bps YOY drag to the company’s organic sales growth profile.
“Plus, this is another step towards the company’s longer-term goal of generating 90% of its revenue from its two core categories of chocolate and biscuits. Additionally, the company is still working through its planned divestiture of its global Halls business, which too should benefit MDLZ for similar reasons. Notably, MDLZ will continue to own and invest in its emerging market gum business as it provides scale and distribution access."
Lazar said from a financial perspective, the purchase price represents a better than expected 15x multiple on estimated current year EBITDA.
“Importantly, with the deal expected to close in 4Q23, there will essentially be no impact to 2023, and we see the divestiture as only modestly dilutive to EPS in 2024, perhaps only a couple of pennies. We’d expect the $1bn+ in net proceeds to be used largely to pay down debt.”
The definitive agreements cover the sale of the business in the United States, Canada and Europe excluding France. The parties have entered into exclusive arrangements for the sale of the business in France.
“We have long admired the product and brand portfolio of the gum business and look forward to combining them with the Perfetti Van Melle brand family,” said Daniele Perfetti, Vice Chairman of Perfetti Van Melle Group.