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    Food Industry M&A's Rose in 2007: Study

    Food Institute analysis reveals continuation of upward trend, aggressive showing by retailers.

    Mergers and acquisitions in the food industry kept increasing in 2007, with a total of 413 deals completed during the year and another 60 agreed on but not yet closed by the end of the year, according to "Food Business Mergers & Acquisitions 2007," an annual publication by The Food Institute, a nonprofit trade association that has been tracking food business mergers and acquisitions for over a quarter-century. This compares to the 392 deals completed in 2006, along with the 59 that were agreed to at the end of that year.

    Food processors again took the lead, with 94 deals closed and another 16 in development, although the total number of transactions in this category declined 14.5 percent from 2006. Investment firms and banks came in second, acquiring 89 food companies, and retailers and restaurants racked up 79 and 57 transactions, respectively.

    Significant transactions among retailers included A&P's acquisition of Pathmark Stores, Inc., and Whole Foods Market, Inc.'s acquisition of Wild Oats Markets, Inc. In the Other Retailers category, which encompasses dollar stores and drug stores, there were just eight completed mergers in 2007, but several of them were major, industry-changing deals, among them Rite Aid Corporation's acquisition of 1,854 Brooks and Eckerd stores from The Jean Coutu Group (PJC), Inc.; the CVS Corp. and Caremark Rx, Inc. merger; and the acquisition of Dollar General Corp. by affiliates of Kohlberg Kravis & Roberts & Co. L.P., GS Capital Partners, an affiliate of Goldman Sachs, Citi Private Equity, and other equity co-investors. The Convenience Store arena also saw increased activity, with 44 mergers and acquisitions completed in 2007 -- a 22.2 percent jump from 2006.

    The publication further found that M&A activity in the retail sector has grown substantially from previous years: compared with 79 transactions in 2007 and 69 in 2006, only 24 deals closed in 2005, and just 33 were completed in each of the previous two years.

    Among the 27 types of companies tracked by the Food Institute, 12 saw growth in merger activity, while 11 experienced a decrease and four stayed at the same level as the year before. Notable increases in merger and acquisition activity were logged in the Snack Food, Dairy, Investment Firms and Banks, Restaurants, and Convenience Store areas, while declines happened in the Bakers, Meat Processors, Seafood Processors, and Multi-Product Processors sectors.

    "Food processors have accounted for the highest number of mergers and acquisitions in the food industry for several years running; however, investment firms and banks have steadily increased their interest in food businesses and are on pace to complete more acquisitions in this industry than food processors within the next few years, " said Danielle Breuel, research & education director at the Elmwood Park, N.J.-based organization. Investment firms upped their purchases 20.3 percent in 2007, acquiring companies in several categories, chief among them restaurants. Forty-four percent of the transactions carried out by investment firms in 2007 involved a restaurant company or assets.

    Although the number of acquisitions by food processors went down in 2007, the individual transactions were important, noted Breuel, who pointed to the trend of larger CPG firms buying smaller, health-focused companies and brands, such as Coca-Cola Co.'s purchase of Glaceau and Fuze beverages, PepsiCo's purchase of Naked Juice, and Kellogg's purchase of Bear Naked granola.

    To order "Food Business Mergers & Acquisitions 2007," visit http://www.foodinstitute.com/manda.cfm, or contact Breuel at (201) 791-5570, ext. 216, or [email protected].

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