PE houses still hungry for food & drinks assets

The food industry may be often thought of as a relatively defensive investment proposition in tough times, but this year's largest deals have actually seen buyout houses on the way out. CVC kick-started the year with the €2.65bn trade sale of CEE-focused brewer StarBev in April. In May, Lion Capital sold 60% of Weetabix to Chinese company Bright Food in a deal that valued the business at £1.2bn. Lion is said to have already generated a 3x return on its initial investment through several dividend payments; when the business is fully exited, the return should rise to nearly 5x.

Although the valuations were less impressive, private equity investments in the sector were actually up in 2012 as well (see chart above). At close to €2bn overall, and with a few weeks left in the year, investment activity was up by a third on 2011 figures value-wise.

France was at the forefront as far as large-cap deals are concerned. In January, LBO France took a minority stake in the €600m buyout of food producer Labeyrie Fine Foods. In June, Montagu completed the €430m management buyout of spread producer St Hubert from Dairy Crest Group.

The picture is less impressive in volume terms, with the 23 transactions recorded by unquote" in 2012 virtually on par with last year's dealflow – but given that many sectors otherwise saw investments drop significantly year-on-year, things could have been worse.

As the overall amounts invested in 2009 and 2010 were somewhat skewed by two particularly large deals (the $2.23bn buyout of StarBev in 2009 and the €1.5bn purchase of Picard Surgelés in 2010), activity in the food & beverages sector has therefore been relatively stable post-crisis, but remains a fraction of pre-2009 figures.

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• Market Insight