Deal activity slows

Corporate activity in the third quarter of 2020 was still impacted by the outbreak of coronavirus and the containment measures implemented by the Australian and New Zealand governments. Comet Line did observe an uplift in investor sentiment and acquisition interest for businesses in the food and beverage industry towards the end of the third quarter. Seven transactions were reported over the seven-week period to 2 October 2020.
Extra Mile Food Trading acquired Marsh Dairy Products for an undisclosed consideration. Marsh Dairy Products supplies bulk dairy ingredients including cheeses, butters and milk powders and honey to the retail and foodservice channels.
Woolworths announced the acquisition of a 65 per cent shareholding in PFD Food Services and PFD’s freehold properties for a consideration of $552 million. The transaction valued the PFD property portfolio at $249m and placed a value $302m on the 65 per cent shareholding in PFD. The Woolworths acquisition valued PFD on an 11x multiple of PFD FY20 EBITDA (before any adjustments for AASB16).
Daly Potato Company, a distributor of pre-packaged potato salads, mashed potato and cauliflower and broccoli in sauce was acquired by ASX-listed Pure Foods Tasmania. Pure Foods Tasmania paid $1.8m in cash and shares for Daly Potato Company.
Fonterra acquired Melbourne-based secondary cheese-processing company Dairy Country from Retail Food Group for $19.2m. Dairy Country has before the acquisition provided shredding and grating services for Fonterra’s retail cheese products, The transaction facilitates Retail Food Group’s exit from its foodservice and manufacturing pursuits, enabling a focus on its core retail food franchising and coffee business.
The Remarkable Milk Company acquired the assets of Organic Dairy Farmers of Australia. Organic Dairy Farmers of Australia was placed in receivership in May 2020. The acquisition includes the land, processing facility and all brands and trademarks.
Queensland based organic dairy product producer, Barambah Organics, sold a 70 per cent shareholding to Tanarra Capital. Barambah Organics produces organic milk, yoghurt, cream and cheese, which are sold via a national distribution agreement with supermarket group IGA.
The outlook for the food and beverage industry is more positive at the end of the third quarter compared to the end of the second quarter. The gradual relaxation of lockdown restrictions in Melbourne and the continued support for the industry by the Australian government will support investor interest in the food and beverage industry.