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QUARTERLY UPDATE Q2 2019
FOOD & BEVERAGE
Page 2
INDUSTRY OVERVIEWM&A TRANSACTIONS & PERFORMANCE
M&A MARKET UPDATE – Q2 2019
Source: Capital IQ. Data as of June 30, 2019, based on publicly disclosed information. All figures are in USD unless otherwise stated.
• M&A activity in the North American food and beverage industry increased in Q2 2019. Overall transaction volume increased from 201 in Q1 2019 to 220 in Q2 2019 and transaction value increased from $3.7 billion to $10.6 billion over the same period.
• The average value per transaction increased from $18.2 million in Q1 2019 to $48.3 million in Q2 2019. The increase in transaction value between quarters was primarily driven by an increase in transactions valued at more than $1 billion, which totaled six during Q2 2019. Compared to Q2 2019, Q1 2019 had no transactions valued at more than $1 billion. One of the larger transactions in Q2 2019 was the $2.1 billion acquisition of warehouse-style grocery chain Smart & Final Stores, Inc. by Apollo Global Management, LLC.
• Consistent with Q1 2019, the restaurant and packaged foods sub-industries within the food and beverage industry continue to comprise the majority of transactions in Q2 2019 representing 30% (Q1 2019 – 28%) and 27% (Q1 2019 –26%) of total transactions respectively. This is consistent with expectations that operators in these industries are responding to intense competition by consolidating to cut costs and widen overall exposure.
• In Canada, M&A activity fell from 37 transactions to 24 transactions and transaction value declined from $670 million to $384 million from Q1 2019 to Q2 2019. Canadian transaction value in the quarter was led by Thailand-based Charoen Pokphand Foods Public Company Limited acquiring a 50.1% share in La Broquerie, Manitoba-based HyLife Ltd. for $372 million on April 22, 2019. Executives of HyLife Ltd. believe this transaction will trigger job creation, greater exposure to the international markets and a stronger global image.
2015 2016 2017 2018 2019
63.8
2.6
8.9
37.0
4.4 4.
3
18.8
71.8
7.9
14.3
28.7
18.4
16.6
24.5
12.3
9.5 3.
7
10.6
190
114
260
216 197
119
256
209 206
144
269
186 164 157
183 197 201
220
-
50
100
150
200
250
300
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Tran
sact
ion
Volu
me
(Num
ber o
f Dea
ls)
Tran
sact
ion
Valu
e ($
Bill
ions
)
NORTH AMERICANFOOD AND BEVERAGE M&A TRANSACTIONS
Transaction Value Transaction Volume
Page 3
MACROECONOMIC INDICATORS
Source: IBISWorld Industry Reports.“F” indicates forecast.
The key external drivers affecting the food and beverage industry in Canada include: per capita disposable income, consumer spending, the consumer price index for food and the consumer confidence index. Growth in the food and beverage industry is expected to be fueled by rising incomes and increased consumer spending, with many consumers seeking premium goods, such as natural and organic products.
60708090
100110120130140
Inde
x
CONSUMER CONFIDENCE INDEX- CANADA
Historical Forecast
-
200
400
600
800
1,000
1,200
1,400
$CAD
Bill
ion
CONSUMER SPENDING- CANADA
Historical Forecast
60
80
100
120
140
160
180
Inde
x
CONSUMER PRICE INDEX FOR FOOD- CANADA
Historical Forecast
- 5,000
10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000
$CAD
Bill
ions
PER CAPITA DISPOSABLE INCOME - CANADA
Historical Forecast
Page 4
SELECT RECENT M&A TRANSACTIONS
Source: Capital IQ.All figures are in USD millions.
• MTY Franchising USA, Inc. was incorporated in 2001 and is based in the United States. The company operates as a subsidiary of Saint-Laurent, Que.-based MTY Food Group, Inc.
• Papa Murphy’s Holdings, Inc. is based out of Vancouver, Washington. Together with its subsidiaries, the company owns, operates and franchises Take ‘N’ Bake pizza stores. As of December 31, 2018 it operated 1,437 stores including 12 in Canada and 25 in the Middle East.
• Butterfly Enterprises, LLC is a Beverly Hills-based private equity firm specializing in the food industry, including agriculture and aquaculture, food and beverage products, food retail and distribution, as well as restaurants and hospitality.
• Bolthouse Farms, Inc. produces fresh produce and beverages and is based out of Bakersfield, California. The acquisition begins the process of reinforcing Bolthouse Farms’ position as a leader and innovator in produce and plant-based products.
• Aurora Cannabis produces and distributes medical cannabis products in 24 countries across 5 continents and is headquartered in Edmonton, Alberta. In this transaction, they acquired the remaining outstanding shares (approximately 49%) of Hempco Food and Fibre.
• Hempco Food and Fibre manufactures and sells hemp food products for human and animal consumption and is based out of Vancouver, B.C. Hempco provides Aurora with an abundant source of cannabidiol (CBD). CBD is a compound found in cannabis.
• L Catterton, formerly known as Catterton Partners Corporation, is a private equity and venture capital firm based in Greenwich, Connecticut. The firm invests in companies with enterprise values ranging between $100 million to more than $1 billion.
• Del Frisco’s Restaurant Group Inc. owns, develops and operates restaurants in the U.S. As of March 12, 2019 it operated 75 restaurants in 16 states. The company was founded in 1981 and headquartered in Irving, Texas.
Announced Apr 11, 2019
TEV 185M
TEV/EBITDA 8.8x
TEV/Revenue 1.53x
Announced Apr 12, 2019
TEV 510M
TEV/EBITDA Not Disclosed
TEV/Revenue Not Disclosed
Announced Apr 16, 2019
TEV 22M
TEV/EBITDA Not Disclosed
TEV/Revenue 18.99x
Announced Jun 24, 2019
TEV 841M
TEV/EBITDA 53.96x
TEV/Revenue 1.97x
acquired
acquired
acquired
acquired
Page 5
PUBLIC COMPARABLE ANALYSISTRADING MULTIPLES & OPERATING STATISTICS
Source: Capital IQ. Data as of June 30, 2019.“LTM” refers to last 12 months. “NTM” refers to next twelve months.
(Figures in USD millions, except percentages and ratios.)
LTM Operating Figures NTM Consensus Estimates Valuation
Company Market Capitalization
Enterprise Value Revenue Revenue
Growth EBITDA EBITDA Margin
Revenue Growth
EBITDA Margin
NTM EV/EBITDA
LTM EV/EBITDA
LTM EV/REV
Processed FoodsNestlé S.A. $299,046 $331,248 $91,750 2.0% $18,664 20.3% 7.2% 21.6% 15.6x 17.7x 3.6xTyson Foods, Inc. $29,455 $41,602 $40,686 1.7% $4,104 10.1% 7.6% 10.1% 9.4x 10.1x 1.0xCampbell Soup Company $12,067 $21,154 $10,071 36.0% $1,954 19.4% (9.2%) 20.7% 11.2x 10.8x 2.1xB&G Foods, Inc. $1,359 $3,025 $1,682 1.0% $296 17.6% (1.0%) 18.8% 9.7x 10.2x 1.8xMedian $20,761 $31,378 $25,379 1.9% $3,029 18.5% 3.1% 19.7% 10.4x 10.5x 1.9xMean $85,482 $99,257 $36,047 10.2% $6,255 16.9% 1.2% 17.8% 11.5x 12.2x 2.1x
Natural FoodsThe Hain Celestial Group, Inc. $2,281 $3,005 $2,364 (3.1%) $170 7.2% (3.9%) 9.0% 14.7x 17.7x 1.3xSprouts Farmers Market, Inc. $2,228 $3,865 $5,334 10.6% $348 6.5% 9.9% 5.9% 11.1x 11.1x .7xUnited Natural Foods, Inc. $473 $3,664 $17,572 76.2% $383 2.2% 40.9% 2.5% 5.9x 9.6x .2xMedian $2,228 $3,664 $5,334 10.6% $348 6.5% 9.9% 5.9% 11.1x 11.1x .7xMean $1,661 $3,511 $8,424 27.9% $301 5.3% 15.6% 5.8% 10.6x 12.8x .7x
SnacksGeneral Mills $31,612 $46,517 $16,865 7.1% $3,619 21.5% 3.0% 20.7% 13.0x 12.9x 2.8xThe Hershey Company $27,985 $32,147 $7,836 3.0% $1,951 24.9% 1.8% 25.2% 16.0x 16.5x 4.1xJ & J Snack Foods Corp. $3,029 $2,881 $1,155 1.0% $160 13.8% 2.7% 14.5% 16.8x 18.0x 2.5xMedian $27,985 $32,147 $7,836 3.0% $1,951 21.5% 2.7% 20.7% 16.0x 16.5x 2.8xMean $20,875 $27,181 $8,619 3.7% $1,910 20.1% 2.5% 20.1% 15.2x 15.8x 3.1x
Alcoholic BeveragesAnheuser-Busch InBev SA/NV $173,553 $285,759 $54,113 (4.4%) $21,372 39.5% 2.9% 41.5% 12.4x 13.4x 5.3xHeineken N.V. $63,675 $78,769 $22,471 4.0% $5,459 24.3% 22.0% 23.5% 12.2x 14.4x 3.5xBrown-Forman Corporation $26,397 $28,530 $3,324 2.3% $1,179 35.5% 5.0% 35.3% 23.2x 24.2x 8.6xMolson Coors Brewing Company $12,117 $22,459 $10,741 (1.3%) $2,405 22.4% (0.5%) 22.6% 9.3x 9.3x 2.1xMedian $45,036 $53,649 $16,606 0.5% $3,932 29.9% 4.0% 29.4% 12.3x 13.9x 4.4xMean $68,935 $103,879 $22,662 0.2% $7,604 30.4% 7.4% 30.7% 14.3x 15.3x 4.9x
Non-Alcoholic BeveragesThe Coca-Cola Company $217,231 $252,915 $32,250 (4.9%) $10,687 33.1% 8.8% 33.5% 21.5x 23.7x 7.8xPepsiCo, Inc. $183,821 $211,752 $65,342 1.4% $12,818 19.6% 2.7% 19.8% 15.9x 16.5x 3.2xStarbucks Corporation $101,535 $108,621 $25,553 8.9% $5,143 20.1% 6.5% 22.0% 18.2x 21.1x 4.3xMonster Beverage Corporation $34,696 $33,837 $3,902 12.2% $1,403 36.0% 10.6% 35.8% 21.9x 24.1x 8.7xMedian $142,678 $160,187 $28,901 1.4% $7,915 20.1% 7.6% 27.7% 19.8x 21.1x 4.3xMean $134,321 $151,781 $31,762 1.8% $7,513 24.3% 7.1% 27.8% 19.4x 20.4x 5.1x
Fruit and VegetableLamb Weston Holdings, Inc. $9,268 $11,675 $3,671 10.0% $798 21.7% 5.2% 24.8% 12.2x 14.6x 3.2xFresh Del Monte Produce Inc. $1,311 $2,251 $4,542 9.2% $169 3.7% 5.9% N/A N/A 13.3x .5xSeneca Foods Corporation $264 $557 $1,200 3.2% ($3) (0.3%) N/A N/A N/A -180.3x .5xMedian $1,311 $2,251 $3,671 9.2% $169 3.7% 5.5% 24.8% 12.2x 13.3x .5xMean $3,614 $4,828 $3,138 7.4% $321 8.4% 5.5% 24.8% 12.2x -50.8x 1.4x
Fast FoodMcDonald's Corporation $158,560 $201,565 $20,842 (6.5%) $10,133 48.6% 1.4% 51.5% 18.5x 19.9x 9.7xYum! Brands, Inc. $33,862 $44,426 $5,571 (4.5%) $1,896 34.0% (0.3%) 37.7% 21.2x 23.4x 8.0xRestaurant Brands International Inc. $17,656 $32,209 $5,369 11.2% $2,126 39.6% 5.5% 41.3% 13.8x 15.1x 6.0xChipotle Mexican Grill, Inc. $20,311 $22,247 $5,025 10.3% $590 11.7% 10.7% 13.2% 30.3x 37.7x 4.4xMedian $27,086 $38,318 $5,470 2.9% $2,011 36.8% 3.4% 39.5% 19.9x 21.7x 7.0xMean $57,597 $75,112 $9,202 2.6% $3,686 33.5% 4.3% 35.9% 21.0x 24.1x 7.0x
Food RetailCostco Wholesale Corporation $116,219 $114,884 $149,616 7.3% $6,170 4.1% 7.3% 4.2% 17.1x 18.6x .8xThe Kroger Co. $17,334 $37,447 $120,691 (2.7%) $5,169 4.3% 2.9% 4.4% 6.9x 7.2x .3xMedian $66,776 $76,165 $135,154 2.3% $5,670 4.2% 5.1% 4.3% 12.0x 12.9x .5xMean $66,776 $76,165 $135,154 2.3% $5,670 4.2% 5.1% 4.3% 12.0x 12.9x .5x
Page 6
PUBLIC COMPARABLE ANALYSISGROWTH, MARGINS & MULTIPLES
Source: Capital IQ. Data as of June 30, 2019.“LTM” refers to last twelve months. “NTM” refers to next twelve months.Valuation details provided on page 5.
2.3%
2.9%
9.2%
1.4%
0.5%
3.0%
10.6%
1.9%
0.0% 10.0%
Food Retail
Fast Food
Fruit and Vegetable
Non-Alcoholic Beverages
Alcoholic Beverages
Snacks
Natural Foods
Processed Foods
LTM REVENUE GROWTH
4.2%
36.8%
3.7%
20.1%
29.9%
21.5%
6.5%
18.5%
0.0% 20.0% 40.0%
Food Retail
Fast Food
Fruit and Vegetable
Non-Alcoholic Beverages
Alcoholic Beverages
Snacks
Natural Foods
Processed Foods
LTM EBITDA MARGIN
4.3%
39.5%
24.8%
27.7%
29.4%
20.7%
5.9%
19.7%
0.0% 20.0% 40.0%
Food Retail
Fast Food
Fruit and Vegetable
Non-Alcoholic Beverages
Alcoholic Beverages
Snacks
Natural Foods
Processed Foods
NTM EBITDA MARGIN
12.9x
21.7x
13.3x
21.1x
13.9x
16.5x
11.1x
10.5x
.0x 10.0x 20.0x 30.0x
Food Retail
Fast Food
Fruit and Vegetable
Non-Alcoholic Beverages
Alcoholic Beverages
Snacks
Natural Foods
Processed Foods
LTM EV/EBITDA
5.1%
3.4%
5.5%
7.6%
4.0%
2.7%
9.9%
3.1%
0.0% 5.0% 10.0% 15.0%
Food Retail
Fast Food
Fruit and Vegetable
Non-Alcoholic Beverages
Alcoholic Beverages
Snacks
Natural Foods
Processed Foods
NTM REVENUE GROWTH
12.0x
19.9x
12.2x
19.8x
12.3x
16.0x
11.1x
10.4x
.0x 10.0x 20.0x 30.0x
Food Retail
Fast Food
Fruit and Vegetable
Non-Alcoholic Beverages
Alcoholic Beverages
Snacks
Natural Foods
Processed Foods
NTM EV/EBITDA
5.2%4.0%
14.2%15.1%
21.5%17.7%
Page 7
PUBLIC COMPARABLE ANALYSISPERFORMANCE ANALYSIS
Source: Capital IQ. Data as of June 30, 2019.Further details provided on page 5.
FOOD & BEVERAGE PEER GROUP LTM EV/EBITDA MULTIPLES
10.0x
12.0x
14.0x
16.0x
18.0x
20.0x
22.0x
Natural Foods Fruits and Vegetables
Processed Foods Fast Food
-11.65%
-12.38%
5.22%
9.24%
9.51%9.27%
9.92%
5.21%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
FOOD & BEVERAGE PEER GROUP STOCK PERFORMANCE
Natural Foods Fruits and Vegetables Alcoholic BeveragesSnacks Processed Foods Fast FoodNon-Alcoholic Beverages Food Retail
10.0x
12.0x
14.0x
16.0x
18.0x
20.0x
22.0x
Alcoholic Beverages SnacksNon-Alcoholic Beverages Food Retail
Page 8
MNPCF – LEADERSHIP TEAM
DUE DILIGENCE LEADERSHIP
TRANSACTION LEADERSHIP
Aleem BandaliManaging Director
Dale AntonsenManaging Director
John CaggianielloManaging Director
[email protected] 416.513.4177
Brett FranklinPresident
Mike ReynoldsManaging Director
Johnny EarlManaging Director
[email protected] 604.637.1514
Dan PorterManaging Director
Stephen ShawManaging Director
Kevin TremblayManaging Director
Mark RegehrManaging Director
Craig MaloneyManaging Director
Patrick KhouzamManaging Director
Jason BurgessManaging Director
Erik St-HilaireManaging Director
Page 9
MNPCF – RECENTLY CLOSED DEALS
NATIONAL
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