Deal in Focus: Eurazeo buys Mondelēz confectionery arm for €157m

The acquisition of Mondelēz's confectionery arm had been in the pipeline for a long time for Eurazeo. After entering exclusive talks in April last year, the GP finally sealed the deal in May 2017, taking over the entity for an estimated €157m and finalising the groundwork it had laid over the last two years.

The takeover involves the acquisition of more than 10 EU-based brands, including Carambar, Poulain, Krema, La Pie Qui Chante, and Terry's, as well as that of five French production sites employing around 750 people.

"We'd heard rumours on the market that the brands were going on sale," says a Eurazeo spokesperson. "Eurazeo had been looking to reinvest in the agri-food sector [following the sale of its stake in Danone group in 2013]; we had previously considered a number of possibilities and brands, though without success. When we came across Mondelēz's portfolio of brands, we knew it was a great opportunity for us to seize."

The transaction sees Eurazeo take a 68% stake in the purchased entity, with the balance (32%) going to Eurazeo Capital II – a co-investment vehicle closed on €500m in January this year – and a pool of co-investors including Cerea Capital, private investors and members of the management team. 

Building the platform
The deal, explains the spokesperson, is far from being the typical private-equity takeover. "This is quite an unusual transaction, in the sense that we did not exactly acquire a 'company'. What we acquired was a pool of brands and factories, from which we had to set up a new business from scratch."

As part of the transaction, a new entity named CPK was created. CPK is the holding of operational group Carambar & Co, representing all brands and licences acquired. To support CPK's inception, a central team of more than 160 employees was recruited, bringing the total number of people employed by the company to around 900.

"Very early on, we started working on the company's structure with the help of sector specialists, which helped us build a clearly defined, transparent project – something that Mondelēz was particularly sensitive to."

A challenging aspect of the deal, the spokesperson adds, was the resources needed to finance the project ahead of the transaction's closing: "The fact that an actual company had to be established meant that the funding involved here was superior to that of a usual deal. For most regular funds, allocating large sums of money to a transaction without having the guarantee of finalising it can prove difficult; but it is a risk that we could take."

As we created the company from scratch, we wanted the management team to be entirely focused on its activity and growth, which is why we refused to introduce debt into the budget from the start" – Virginie Morgon, Eurazeo

Under Eurazeo, Carambar, Poulain, Krema and the other brands are returning to their country of birth – France. By 2020, the GP has set itself the target of having 100% of the group's merchandise produced in France. 

CPK's revenues are currently estimated at around €250m, with €63m of net available cash and no debt. Says the spokesperson: "As we created the company from scratch, we wanted the management team to be entirely focused on its activity and growth, which is why we refused to introduce debt into the budget from the start; but if need be, a debt package could still be put in place in the longer run."

CPK will be targeting organic sales growth of 20% during the next five years and an EBITDA margin of 15%. A budget of around €35m will finance an intensive industrial investment programme, and the sums allocated to marketing and advertising should be multiplied by three.

People
Eurazeo – Virginie Morgon (deputy CEO).

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