F&B sector emerges a hotspot in M&A deal making

A strong pipeline in the sector is predicted for 2017

Gulf News

Dubai: Food & Beverage sector M&A deal value for the full year 2016 in the Mena region surged to over $3.4 billion (Dh12.48 billion), from just $402 million the previous year, according to Mergermarket, the leading provider of M&A data and intelligence.

Four deals in the consumer sector have been announced so far this year worth $104 million with a strong pipeline predicted for 2017. Deal value in the food & beverage sub-sector so far this year has been driven by consumer giant, Nestlé’s, acquisition of Caravan Marketing Company, a leading Egyptian instant coffee company and owner of the Bonjorno brand, for $33 million.

The acquisition reflects Nestlé’s ambition to invest in Egypt and the fast development of a rapidly growing soluble coffee segment which has been gaining popularity in the region. A new deal to watch is Brazilian meat producer, BRF’s, sale of a stake in its halal food unit, One Foods. The stake may be targeted by Saudi Agricultural & Livestock Investment and the sovereign wealth funds, Abu Dhabi Investment Authority and Qatar Investment Authority.

“Food and beverage continues to be a hot sector for M&A in the MENA region. In an era of low oil prices, challenging economic conditions and stiff competition, thriving businesses are highly sought-after by corporates and private equity firms. A number of successful concepts are expanding throughout the region through opening company-owned locations or franchising. Most deals in this space will likely be seen in UAE, Saudi Arabia and Egypt,” Ruth McKee Al Ghamdi, Head of Mergermarket MENA, said at the Mergermarket’s MENA Mergers 2017 forum.

Mergermarket intelligence suggests a further flurry of small-cap deals are expected including Emirates Modern Poultry Co (Al Rawdah), who are mulling over a $20 to 30 million joint venture in Kuwait and Oman to increase their export capabilities.

“Deal flow in consumer-led sectors remains steady, with activity in the food and beverage (F&B) sector maintaining momentum through FY 2016 and into Q1 2017. The UAE traditionally sees a large chunk of the region’s F&B activity, and we expect to see continued interest in both domestic and cross-border transactions, with some mega deals achieved in the Middle East last year,” said Jayshree Gupta, corporate partner, Baker McKenzie Habib Al Mulla UAE.

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