
Deal in Focus: Portobello’s meal deal craving sated by IAN acquisition

Portobello Capital’s deal for packaged food business Industrias Alimentarias de Navarra (IAN) highlights private equity’s mushrooming appetite for the Spanish ready-meals market. Kenny Wastell reports
The acquisition of IAN from listed trade vendor Viscofan valued the business at €55.8m and marked the first transaction for Portobello Capital III, a €375m vehicle that reached a final close in September 2014. The deal came shortly after the acquisition of La Cocineria by Lion Capital-backed Findus and Carlyle Group's secondary buyout of Palacios Alimentación, which produces pre-packaged tortillas and pizzas.
The growing activity within the sector, says Portobello founding partner Iñigo Sánchez-Asiaín, can be attributed to two elements. First, he explains, larger businesses are increasingly looking to divest smaller brands. Second, private equity firms specialising in food companies are looking to take advantage of the changing patterns in consumption within Spain.
Appetite for consumption
"The food industry is already very resilient, but it is also changing," says Sánchez-Asiaín. "In a changing market there are good opportunities to follow the social trends. The number of single occupancy homes in Spain is growing strongly and employment is returning. As a result, the ready-meals market is currently going through double-digit growth and it is a sector I believe will continue to grow."
The GP originally approached Viscofan on an off-market basis around a year before the deal completed. "We had been following various companies in the sector for a while," explains Sánchez-Asiaín. "Consolidation of the sector is something we believe is very much needed. We identified IAN through an intermediary, who understood that Viscofan's ownership of the business was not strategic. Although they had not been considering a divestment, IAN was not a core asset for them." This much was confirmed by the vendor, which – upon completion of the transaction – stated it was looking to focus its attention on its product-packaging business.
Despite the off-market nature of the acquisition and the fact both parties were keen to agree on a deal, the process was not as straightforward as it may have been. Viscofan and Portobello entered into exclusive negotiations on 10 November 2014, and ended on 23 February without a deal being agreed. However, Sánchez-Asiaín explains this was not reflective of a standoff between vendor and acquirer. "The deal was almost done," he says. "We only had a couple of final negotiation elements to agree on and over the following few days we managed to secure an agreement. If anything, allowing the exclusivity to lapse might have been a tactical move by Viscofan to push the deal towards completion."
Three-course deal
The firm will implement a three-pronged growth strategy for IAN. In addition to consolidating the ready meals sector, Portobello will also look to make acquisitions in the canned vegetables segment. The GP intends to bolt on medium-sized family owned businesses in order to secure a substantial share of the market. The resulting group of businesses will then be subject to rebranding and restructuring activities. Once this strategy has been implemented, IAN will seek to increase its reliance on international sales, which currently account for just 25% of its revenues.
With the ink barely dry on documents confirming the change of ownership, Portobello has not yet identified its exit strategy for IAN. However, Sánchez-Asiaín believes the business could prove an attractive proposition to trade buyers. "Following implementation of our strategy in the coming years," he says, "we should have a stronger company with good market share and a strong brand. That should make it attractive to trade buyers, but it is not yet time to speculate about exit routes. We first need to develop the vision of the company, bring value to it through our strategy and boost profitability."
Advisers
Equity – Óptima Corporate (Corporate finance), PwC (Financial due diligence); Garrigues (Legal).
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