TIDMHFG
RNS Number : 2037V
Hilton Food Group PLC
10 December 2021
THIS ANNOUNCEMENT (THE "ANNOUNCEMENT"), AND THE INFORMATION
CONTAINED IN IT IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION,
DISTRIBUTION OR FORWARDING, IN WHOLE OR IN PART, DIRECTLY OR
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THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT
CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMATION,
OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE
OR DISPOSE OF ANY SECURITIES IN HILTON FOOD GROUP PLC OR ANY OTHER
ENTITY IN ANY SUCH JURISDICTION.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
10(th) December 2021
H ilton Fo od Gr o up plc
Hilton agrees to acquire leading international smoked salmon
producer, Foppen
Hilton Food Group ("Hilton"), the international multi-protein
food business, is pleased to announce that it has agreed to acquire
a leading international smoked salmon producer, Dutch Seafood
Company B.V., which trades as "Foppen" (the "Acquisition"),
expanding its presence in a growing protein category, as well as
entering the US, a new geography for Hilton.
Hilton has also today launched an equity placing to raise gross
proceeds of approximately GBP75 million to part fund the
Acquisition, as announced separately (the "Placing").
The announcement follows the recent full acquisition of Dalco, a
leading vegan and vegetarian food manufacturer, the acquisition of
Fairfax Meadow, as well as Hilton's expansion into Hilton Seafood,
together with several years of sustained growth in seafood and
plant-based foods by the business.
Strategic highlights
Foppen is an attractive business which is highly complementary
to Hilton:
-- Smoked salmon diversifies Hilton into a protein category with a strong growth outlook.
-- Foppen is focused on added value speciality smoked salmon
products (e.g. toast salmon) which offer a differentiated portfolio
of products.
-- Foppen is expected to significantly enhance Hilton's customer base through:
o a number of new customers in the US, a new strategic
market;
o the development of an important existing customer relationship
(Albert Heijn in the Netherlands); and
o significant cross-selling opportunities to both Hilton and
Foppen's existing international customer bases.
-- Foppen will significantly expand the scale of Hilton's
seafood business with potential to deliver procurement and other
savings.
-- Foppen brings two well-invested, dedicated smoked salmon
facilities in Harderwijk, the Netherlands and Preveza, Greece, and
an experienced management team and workforce.
-- Foppen stands to benefit from Hilton's exceptional seafood
standards and record, with 98% of all Hilton fisheries certified to
the MSC and active membership of the UN Global Compact and its
Sustainable Ocean Business Action Platform, as well as governance
roles on leading global standards bodies such as the Marin Trust,
Global Gap and the Responsible Fishing Vessel Scheme.
Financial and transaction highlights([1])
-- Foppen's FY 2021 ended 31 March 2021 actual revenue of
EUR139.7 million, adjusted underlying EBITDA of EUR10 million.
-- Enterpri se value of EUR90.0 million including adjustments
for net debt and net working capital.
-- The transaction will be funded through:
o equity placing of approximately GBP75 million, that will
predominantly fund the Foppen acquisition and partially refinance
the previously announced acquisition of Fairfax Meadow,
representing an increase of approximately 8% of the current issued
ordinary share capital of the Company, as announced separately.
o balance funded through a committed acquisition bridge
facility.
-- The transaction is expected to be accretive to earnings per
share in the first twelve months for Hilton while ensuring net
leverage remains below 2.0x ([2]) .
-- Completion of the transaction is subject to Dutch competition
authority and works council approval.
Hilton's CEO, Philip Heffer, commented:
"The acquisition of Foppen is an exceptional opportunity for
Hilton and another step towards our goal of becoming the global
protein partner of choice. More and more consumers around the world
are seeking affordable, high quality, and sustainable protein, and
this acquisition will help Hilton take our offer into new markets
and to new global customers for the first time.
"Foppen's premium product portfolio and strong customer
relationships are a great fit for Hilton's model, while Hilton's
strong ESG credentials in seafood will make sure our future growth
plans are sustainable in every sense of the word. We welcome
Foppen's management and employees and look forward to delivering
profitable growth through the combination of Hilton and
Foppen."
Andre van der Padt, Foppen CEO, added:
"We are excited by the future prospects of Foppen under Hilton's
ownership and look forward to working with Philip and team.
Foppen's offer to customers, suppliers and employees will be
enhanced as part of Hilton Food Group."
Notes to editors
About Hilton:
Hilton Food Group plc is a leading international multi-protein
producer, serving customers and retail partners across the world
with high quality meat, fish, vegan and vegetarian foods and
meals.
We are a business of over 5,000 employees, operating from 19
technologically advanced food processing, packing and logistics
facilities across 16 markets in Europe and Australasia.
For almost thirty years, our business has been built on
dedicated partnerships with our customers and suppliers, many
forged over several decades, and together we target long-term,
sustainable growth and shared value.
We supply our customers with high quality, traceable, and
assured food products, with high standards of technical excellence
and expertise.
About Foppen:
Dutch Seafood Company B.V., trading as Foppen, is a leading
international manufacturer of branded and private label premium
smoked salmon products. The business was founded in 1918 by the
Foppen family and remains true to its traditions today by combining
craftsmanship and traditional methods of smoking, with the latest
state-of-the-art technology. Foppen's key customers are major
retailers in the US and the Netherlands. Foppen services its
customers from two facilities in the Netherlands and Greece with
approximately 500 employees.
Conference call details
A webcast conference call for analysts and investors will be
held at 8.00am (UK time) today. The presentation will be followed
by an analyst Q&A.
To register for this call, please go to the following link:
https://www.incommglobalevents.com/registration/client/9548/hilton-food-group-/
For further information please contact:
Hilton Food Group plc Tel: +44 (0) 1480 387214
Philip Heffer, CEO
Nigel Majewski, CFO
Headland Consultancy Tel: +44 (0) 20 3805 4822
Edward Young
Will Smith
Joanna Clark
Footnotes:
[1] The Acquisition constitutes a class 2 transaction under the
UK Listing Rules. For the purposes of LR 10.4.1 R (Notification of
class 2 transactions): the value of the gross assets of Dutch
Seafood Company B.V. was EUR63.7 million at 31 March 2021; the
statutory net loss was EUR0.2 million for the year ended 31 March
2021; and the sellers are funds managed and controlled by H2 Equity
Partners B.V., a European mid-market private equity fund, and Mr A.
P. van der Padt.
[2] Note: This is a target only and this statement does not
constitute a profit forecast. There can be no assurance that the
transaction will be accretive to earnings. Accordingly, this should
not be taken as an indication of estimated or actual future results
or levels of indebtedness and potential investors should place no
reliance on this statement in deciding whether to invest in the
Company. The Company's actual results may be positively or
negatively affected by factors beyond the control of the
Company.
Further information in relation to the Acquisition
1. Introduction
The Board announces that it has entered into a conditional
agreement to acquire the entire issued share capital of Foppen. In
accordance with the Listing Rules, Foppen is of such a size
relative to the Company that the Acquisition constitutes a class 2
Transaction.
2. Background to and reasons for the transaction
Hilton strategy
Hilton has a simple, clear and well-defined strategy focusing on
the following four key elements:
1. Growing volumes and extending product ranges supplied and
services provided to existing customers
2. Optimising use of assets and investing in new technology to
deliver competitive advantage to our customers
3. Maintaining a vigilant focus on food safety and integrity and
reducing unit costs, while improving product quality and service
provision
4. Entering new territories and markets either with new
customers or in partnership with our existing customers
Throughout Hilton's development it has worked closely and
collaboratively with its customers to deliver the strategy outlined
above. The Group has grown its capacity and capabilities through
disciplined capital investment and continued innovation to meet its
customers' commercial needs and expanded its range of services to
enhance its customer offering. The Group's successful expansion
into international markets, including recent investments in
Australia, New Zealand and Portugal, are good examples of this
successful strategy in execution. As a result of this strong and
growing track record as a trusted and added value partner to its
customers, the Group is working with an increasing number of its
existing customers on plans to expand Hilton's products,
capabilities and capacity.
Historically, the Group had been focused on the processing of
meat, principally beef and lamb as well as pork outside the UK,
which has continued to remain at the core of the business. However,
in more recent years, the Group has substantially broadened its
capabilities, customer portfolio and customer reach, through the
expansion into other international markets and product categories
(including poultry, fish and vegetarian/vegan products). The Board
sees this as an attractive and sustainable area to develop and grow
Hilton's business, whilst offering significant cross selling
potential underpinned by Hilton's operating capabilities.
Reasons for the Acquisition
Foppen represents an attractive opportunity to broaden and
deepen Hilton's seafood capabilities and offering to its UK and
international customers. The Acquisition expands the Group's
portfolio into smoked salmon with a complete, differentiated
portfolio of standard and specialty products and low-cost
manufacturing capabilities. In addition, the Acquisition expands
Hilton's customer portfolio and geographical reach to North America
and Asia including sales to Costco.
Financial effects of the Acquisition
It is anticipated that the Acquisition will be earnings
enhancing from the first twelve months with return on invested
capital ("ROIC") greater than cost of capital ([2]) . The Group
believes this is an exciting entry into a new, fast-growing,
added-value and high-margin protein category with attractive
medium-term opportunity to drive incremental cross-selling
revenues.
3. Summary information about Foppen
Background to Foppen
Dutch Seafood Company B.V., trading as Foppen, is a leading
international manufacturer of branded and private label premium
smoked salmon products with proprietary processing capabilities.
The business was founded in 1918 by the Foppen family and remains
true to its traditions today by combining craftsmanship and
traditional methods of smoking, with the latest state-of-the-art
technology. Foppen's key customers are major retailers in the US
and the Netherlands. Foppen services its customers from two
facilities in the Netherlands and Greece with approximately 500
employees in aggregate.
Since 2020, Foppen has focused exclusively on salmon and
increased focus on its specialty products. In 2018 H2 led a merger
of Foppen and Klaas Puul, creating the Dutch Seafood Company B.V
and in 2020 Klaas Puul was sold to Sykes Seafood resulting in the
discontinuation of non-salmon products.
Foppen's leading market position:
-- Clear market leader in the US in smoked salmon specialties
with 61% of sales in 2021 to US customers.
-- Clear market leader in the Netherlands in smoked salmon
specialties and semi-specialties and overall #2 in Europe in smoked
salmon specialties.
-- Long-standing, trusted relationships, built on quality and
service, and premium product portfolio cement position with key
customers.
-- The grocery retail market for smoked salmon in the US grew by
29% from 2019 to 2020 and in the Netherlands grew by 11% in the
same period.
Foppen's competitive advantage:
-- Greek manufacturing with low-cost labour supports structural
cost advantage vs. domestic US processors.
-- Volumes allow for economies of scale in procurement and operational cost efficiencies.
-- Foppen's management team with significant food industry
experience will be supported by Hilton's Benelux operational teams,
UK fish processors and Group functional experts.
Financial summary
Foppen has a proven track record of being profitable and cash
generative, with underlying performance improvements. This is
largely driven by the increased focus on smoked salmon specialties
and the discontinuation of non-salmon products, which relate to
other seafood species (e.g., shrimp). There has been limited impact
on the business from Covid-19.
Year ended
31 Year ended 31
March 2020 March 2021
EURm EURm
Revenue 141.9(1) 139.7(2)
Continuing/underlying revenue(3) 99.0 118.0
Continuing/underlying EBITDA(3) 2.5 10.1
Gross assets(3) 59.6 63.7
(1) Dutch Seafood Company BV reported statutory revenue adjusted
to exclude the impact of disposals
(2) Reported within the Dutch Seafood Company BV annual
report
(3) Adjusted to exclude the impact of disposals and discontinued
trading relationships.
Current trading in FY22 demonstrates continued underlying
growth, particularly in the US market. Underlying growth continues
with volumes accelerating in US customers. Foppen's trading for the
year to date has therefore been ahead of last year with EBITDA
expected to be in line with our expectations.
4. Principal terms of the Acquisition
The sale and purchase agreement entered into by the Buyer, the
Company, and the Seller on 10 December 2021 sets out the terms of
the Acquisition pursuant to which the Buyer has agreed to acquire
Foppen from the Sellers for an enterprise value of approximately
EUR90 million payable in cash on Completion. Any amount of leakage
will be deducted from the purchase price.
Completion of the transaction is subject to Dutch competition
authority and works council approval.
5. Financing of the Acquisition
Historically, the Company has built up cash balances through
strong cash generation. In addition to the Acquisition, the Board
believes there are significant growth opportunities in the medium
term. The Group has decided to take a prudent approach to financing
the Acquisition, which will be funded as follows:
-- Equity placing to raise approximately GBP75 million, that
will predominantly fund the Foppen acquisition (including a GBP10m
cash injection, working capital funding) and partially refinance
the previously announced acquisition of Fairfax Meadow
-- Additional funding drawn from a committed acquisition bridge
facility jointly provided by Rabobank and Ulster Bank.
-- This transaction and the previously announced acquisition of
Fairfax Meadow are expected to be accretive to earnings per share
in the first twelve months for Hilton.([2])
-- Ongoing process to refinance the Group's debt facilities of
GBP340 million together with existing net cash balances, which were
GBP96 million at 18 July 2021, in order to provide funds for future
capital investment and the Group's working capital
requirements.
The Board anticipates making strategic capital investments over
the next 3 years:
-- Capex to support both growth in the existing business and
customer demand for new facilities.
-- Net debt as a result of this investment program will be within our historical guidance.
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December 10, 2021 02:00 ET (07:00 GMT)
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