Another iconic Australian food company has fallen into foreign hands, with Brazilian food giant JBS's $1.45 billion takeover of ham, bacon and smallgoods producer Primo Smallgoods.
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For JBS, which is Australia's biggest meat packer, marketer and exporter and the world's largest processor of protein, Primo is a move away from commodity meat into high-value branded products, an expansion into Australian pig meat and a launching pad to export protein to Asia.
"They [JBS] are not a branded company and our products are virtually all brands," Primo chief executive Paul Hitchcock said. "They are a natural owner of this business ... and will be valuable in growing our exports. They open doors that we didn't previously have available."
Mr Hitchcock, a former Goodman Fielder and Corporate Express executive, became Primo chief executive in August, when founder Paul Lederer and his private equity backers Affinity were ready to cash out. Primo is a recent target for JBS and the deal was struck in months.
A Hungarian immigrant, Mr Lederer owns the Western Sydney Wanderers football club and founded Primo in 1985. He sold 70.1 per cent of the company to Affinity in October 2011. Primo's enterprise value then was $740 million.
With Affinity's backing, Primo debt-funded a $200 million food plant in Brisbane, acquired New Zealand's largest bacon and ham producer Beehive and opened an office in Shanghai.
Mr Hitchcock said it was early days for the Primo brand in Asia but its key markets included Korea, Hong Kong, Singapore and China.
It is understood Primo will make about $150 million in earnings before interest, tax, depreciation and amortisation this year. Factoring in about $30 million of synergies, the JBS deal represents a multiple of about eight times earnings.
Of Primo's $1.6 billion of revenue, about $130 million is export sales. JBS wants to leverage its global sales and distribution network to expand exports.
"Primo's strong brand and portfolio of high-quality smallgoods products, when coupled with JBS's global customer base, will allow us to take high-quality Australian value-added products to the international market," JBS Australia chief executive Brent Eastwood said.
The deal is another big one for JBS adviser Rothschild. Sam Prentice's team have had several high-profile deals this year, such as Saputo's acquisition of Warrnambool Cheese and Woolworths' David Jones takeover.
Rothschild brought JBS to Australia with the acquisition of Swift and its subsidiary Australian Meat Holdings for about $US1.4 billion in 2007. JBS then built its Australian footprint, buying Tasman Group, Rockdale Beef, Tatiara Meat Company and more recently Andrews Meat.
JBS and Mr Hitchcock said there would be no big job cuts or restructuring. It would be business as usual for Primo's brands, suppliers and 3000 employees.
JBS must now negotiate the Foreign Investment Review Board and the Australian Competition and Consumer Commission to conclude the deal, which is being funded by a mix of cash and debt.
The sale is the latest in a string of Australian food and beverage companies being snapped up by foreign buyers.
Treasury Wine Estate, maker of Penfolds, rejected a $3 billion private equity bid from American private equity giant Kohlberg Kravis Roberts earlier this year. A consortium of Asian investors have made a $1.4 billion bid for Goodman Fielder and Canadian dairy group won a takeover battle for Warrnambool Cheese and Butter in January.
