Piper Jaffray
Consumer M&A Weekly
Consumer Mergers & Acquisitions
David Jacquin - Managing Director, Group Head, 415-277-1505, david.m.jacquin@pjc.com
Tom Halverson - Principal, 612-303-6371, j.t.halverson@pjc.com
John Barrymore - Vice President, 415-277-1501, john.a.barrymore@pjc.com
May 24, 2004
Scott LaRue - Managing Director, 650-838-1407, r.s.larue@pjc.cm
John Twichell - Vice President 415-277-1533, john.t.twichell@pjc.com
Robert Arnold - Associate, 415-277-1548, robert.c.arnold@pjc.com
Selected Consumer M&A Transactions
(Approximate valuations, $ in millions)
Date
Equity
Value
Announced
Effective
Target
Acquiror
05/20/04
Pending
Ethnic Gourmet & Rosetto lines
Hain Celestial Group
05/20/04
05/20/04
American Pacific Enterprises
05/20/04
05/20/04
Cellfoods Corp
05/20/04
05/20/04
Thai Express
05/19/04
05/19/04
American Satellite & Video Inc
05/18/04
Pending
KRB Seed Company (Budd Seed)
05/18/04
Pending
Shoe Zone (Footstar Inc.)
05/17/04
05/17/04
05/17/04
05/17/04
05/14/04
Pending
Enterprise
Value
LTM
EBITDA
EV / LTM
EBITDA
NA
NA
NA
NA
Genstar Capital
NA
$100.0
NA
Pacific Fuel Cell Corp.
NA
NA
NA
MTY Food Group Inc.
NA
NA
NA
Blockbuster Inc.
NA
NA
Central Garden & Pet Company
NA
NA
Novus Inc.
NA
ColorbOk
FdG Associates
Cremo business (Arla Foods)
Smith Garden Products
(1)
Universe
Comments
Food & Beverage
Hain Celestial Group to buy Heinz's Ethnic Gourmet and Rosetto lines
NA
Consumer Products
Genstar Capital has acquired home furnishings supplier American Pacific
NA
Food & Beverage
Pacific Fuel Cell has acquired soybean powder developer Cellfoods
NA
Restaurant
MTY Food Group has acquired Thai Express Canada and Thai Express Intl
NA
NA
Retail
Blockbuster has acquired American Satellite & Video
NA
NA
Retail
Central Garden & Pet to acquire assets of KRB Seed Company
$5.5
NA
NA
Retail
Footstar has agreed to sell 27 Shoe Zone stores in Puerto Rico to Novus
NA
NA
NA
NA
Consumer Products
FdG Associates has made an equity investment in ColorbOk
Kerry Group
NA
NA
NA
NA
Food & Beverage
Kerry Group has acquired Arla Foods Cremo business
Garick
NA
NA
NA
NA
Consumer Products
Garick to acquire the assets of Smith Garden Products
Note: Figures per public filings and press releases.
(1) Enterprise Value of roughly $100 million per PrivateEquityCentral.net
M&A Spotlight Transactions
May 20, 2004 - Hain Agrees to Buy Two Frozen Food Brands from Heinz
Hain Celestial Group Inc., the largest U.S. organic foods maker with close ties to the H.J. Heinz Co. has agreed to buy two lines of frozen foods from the Pittsburgh food
conglomerate. Hain Celestial Group, of Melville, N.Y., will acquire the Ethnic Gourmet brand of natural ethnic frozen meals and the Rosetto brand of frozen Italian products to
more than double sales of frozen products and expand its low-carbohydrate items. The two lines had combined annual sales of $30 million last year and employed about 130 at an
Ethnic Gourmet plant in Framingham, Mass., and a Rosetto facility in West Chester, Chester County. The Heinz workers will become Hain employees and Heinz marketing
executive Matthew Cooper will transfer to Hain to serve as general manager of that company's growing frozen foods offerings.
All M&A Transaction Multiples
(LTM Data as of 12/31/03)
15.0x
13.5x
10.7x
Chief Executive Irwin Simon, 45, is buying the Heinz businesses to boost frozen-foods sales to about $50 million a year. He plans to debut low-carbohydrate frozen dinners and
pastas under the CarbFit and Rosetto brands to augment Hain's CarbFit line of cookies, crackers and chips. ``People are selecting low-carb products without necessarily adhering to
strict low-carb diets,'' said Hain Chief Financial Officer Ira Lamel. ``That is going to allow low-carb products to survive what some people think of as a fad.''
11.0x
Hain also said it reached agreement with Sesame Workshop to create natural foods under the Earth's Best brand using Sesame Street characters. Terms of the two transactions
weren't disclosed, Melville, New York-based Hain said in a statement.
5.0x
13.2x
12.4x
13.0x
10.7x
8.6x
9.0x
9.7x
6.9x
6.0x
7.0x
5.1x
3.0x
< $25
The deal with Sesame, the nonprofit organization behind Sesame Street, is intended to increase sales of Earth's Best brand of cereal bars and juices to preschool children. Sesame
Workshop Chief Executive Gary Knell said the agreement is part of the group's efforts to reduce obesity among children.
$25 - $100
$100 - $250
$250 - $1,000
>$1,000
Transaction Size
EBIT
EBITDA
Heinz and Hain have had a relationship since 1999, when Heinz sold Hain its Earth's Best organic baby food brand. At the time, the businesses agreed to form a "strategic alliance
for the global production and marketing of natural and organic foods and soy-based beverages."
Heinz has a 16.7 percent stake in Hain and two Heinz executives sit on Hain's board of directors. In the most recent fiscal year, Hain paid Heinz about $1.5 million in purchases,
royalties and profit-sharing fees, while Heinz paid Hain $600,000 in royalties, according to regulatory filings.
Officials also said that Heinz and Hain Celestial would collaborate to develop more opportunities in the natural and organic foods market, as well as leverage infrastructure and
supply chain systems.
Source: Company Press Release.
Recent High Yield Debt and Convertible Securities Issued by Consumer Companies
Announced
Issued
04/06/04
03/30/04
03/30/04
03/24/04
03/17/04
03/09/04
03/05/04
03/03/04
03/03/04
04/14/04
04/06/04
04/06/04
03/25/04
03/25/04
03/16/04
03/10/04
03/15/04
03/08/04
Source: Bloomberg, Public Press
Company
Issue Description
Vicorp Restaurants
Prestige Brands Inc
Sealy Mattress
Real Mex Restaurants
American Achievement
Mrs. Fields
Gold Kist Inc
True Temper Sports
Friendly Ice Cream
$136.5 mm HY notes (144a)
$210.0 mm HY notes (144a)
$390.0 mm HY notes (144a)
$105.0 mm HY notes (144a)
$150.0 mm HY notes (144a)
$115.0 mm HY notes (144a)
$200.0 mm HY notes (144a)
$125.0 mm HY notes (144a)
$175.0 mm HY notes (144a)
Moody's / S&P
Coupon
Maturity
B3 / B
Caa1 / CCC+
Caa1 / BB2 / BB3 / BB3 / CCC+
B2 / BB3 / BB2 / B-
10.50%
9.25%
8.25%
10.00%
8.25%
11.50%
10.25%
8.38%
8.38%
2011
2012
2014
2010
2012
2011
2014
2011
2012
Business Description
Operator and franchisor of mid-scale family restaurants, under Bakers Square and Village Inn names
Marketer of consumer products under Prell®, Chloraseptic®, Clear eyes®, Murine® and Comet® brands
Manufacturer of a diversified line of mattress and foundation products under the Sealy name
Operator of El Torito, Acapulco, and other casual dining Mexican restaurant concepts
Manufacturer of class rings, yearbooks, graduation products and achievement publications
Snack-food retailer selling brownies, cookies, pretzels, and other baked goods
Marketer of farm commodities in processed and unprocessed forms
Manufacturer of manufactures golf shafts and bicycle tubing, forks, and seatposts
Operator of restaurants serving signature sandwiches, entrees, and ice cream desserts
Piper Jaffray
Consumer M&A Weekly
Consumer Mergers & Acquisitions
David Jacquin - Managing Director, Group Head, 415-277-1505, david.m.jacquin@pjc.com
Tom Halverson - Principal, 612-303-6371, j.t.halverson@pjc.com
John Barrymore - Vice President, 415-277-1501, john.a.barrymore@pjc.com
May 24, 2004
Scott LaRue - Managing Director, 650-838-1407, r.s.larue@pjc.cm
John Twichell - Vice President 415-277-1533, john.t.twichell@pjc.com
Robert Arnold - Associate, 415-277-1548, robert.c.arnold@pjc.com
The Private Equity/ LBO Sponsor Corner
Date
05/20/04
05/17/04
05/11/04
05/05/04
05/03/04
04/30/04
04/23/04
04/21/04
04/15/04
04/14/04
04/02/04
04/01/04
04/01/04
Target
Financial Sponsor
Summary of Transaction
American Pacific Enterprises
ColorbOk
Gift Bag Unit (Jeanmarie Creations)
MD Beauty
Caribbean Restaurants
Core-Mark International
Loehmann's Holdings
Leiner Health Products
Fuze Beverages
Hartselle Frozen Foods & Meat
Bear Creek Corp
Sunny Delight & Punica juice brands
Nonni's Food Co.
Genstar Capital
FdG Associates
Management Buyout Group
Berkshire Partners & JH Partners
Castle Harlan
Investor Group
Crescent Capital
Golden Gate Capital & North Castle Partners
Castanea Partners
Private Investor Group
Wasserstein & Co
J.W. Childs
Wind Point Partners
Genstar Capital has acquired American Pacific, a designer and marketer of specialty bedding products, bath accessories and window coverings
FdG Associates has made an equity investment in ColorbOk, a manufacturer and distributor of scrapbooking, toy, stationery and gift products
A private group led by management of Jeanmarie Creations has agreed to acquire the decorative gift bag and gift tag business of Jeanmarie Creations
Berkshire Partners and JH Partners have agreed to recapitalize MD Beauty, a specialty cosmetics company which sells its cosmetics and skin care products
Castle Harlan to acquire Caribbean Restaurants, operator of 165 Burger King restaurants in Puerto Rico, from Oak Hill Capital and American Securities Capital
An investor group comprised of Texas executives has offered to purchase Core-Mark International, the nation's second largest wholesale distribution company
Crescent Capital has agreed to take discount clothing retailer Loehmann's Holdings private
Golden Gate Capital and North Castle Partners have announced a recapitalization of Leiner Health Products
Fuze Beverages, manufacturer of Smart Age functional beverages, has received a significant equity investment form Castanea Partners
A private investor group led by Jerry Smith has acquired Hartselle Frozen Foods & Meat from Samie and Billy Wiley
Wasserstein & Co has agreed to acquire Bear Creek Corp, the largest direct marketer of fruit and food gifts in the U.S., from Yamanouchi Pharmaceutical
J.W. Childs Associates has agreed to acquire Sunny Delight and Punica juice brands from Procter & Gamble
Wind Point Partners has acquired Nonni's Food, a leading manufacturer of biscotti and bagel chips from Swander Pace
Private Equity/LBO Analytics
SPREAD (LIBOR) FOR LEVERAGED BUYOUTS SENIOR BANK LOANS
By Deal Size
BUYOUT FUNDS RAISED
$ in Billions
Basis Points
$70
450
400
409
363
350
300
277
250
264
251
200
1996
316
306
242
1997
257
309
294
344
334
357
353
406
328
$50
$34.5
$40
$30
238
1998
$63.3
$55.4
$60
$18.4
$20
1999
2000
Less than $100 Million
2001
2002
2003
Q1 04
$10
$5.3
$6.0
1992
1993
$36.9
$34.5
$24.0
$23.2
$17.0
$11.7
$5.8
$0
$100 Million to $250 Million
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Q1
2004
Market Overview
Equity Capital Markets Activity:
NASDAQ
DJIA
S&P 500
Russell 2000
S&P Food Index
S&P Retail Index
S&P Apparel Index
S&P Rest. Index
Last Week’s Activity
There were 14 transactions completed in the equity capital markets last week raising a combined $3.3 billion. Deal activity consisted of 2 IPOs, 10 follow-ons
and 2 convertibles. Follow-on activity consisted of 6 shelf takedowns and 3 conventional marketed transactions. On average, follow-on offerings traded flat in
registration, but finished the week up 2% in the aftermarket.
The Week Ahead
There are 20 deals expected to price this week including 8 IPOs, 11 follow-on offerings and 1 convertible. Issuers look to raise a combined $5.4 billion.
Broader Market Activity
The major market indices were mixed for the week. The Dow Jones decreased 46 pts, or 0.5%, and closed at 9,967. The Nasdaq increased 8 points, or 0.4%,
and closed at 1,912. The S&P 500 fell 2 points, or 0.2%, and closed at 1,094. The Russell 2000 increased 2 points, or 0.4%, finishing at 546.
Close as of
Weekly
YTD
LTM
5/21/2004
1,912
9,967
1,094
546
231
366
209
233
% Change (1)
0.4
(0.5)
(0.2)
0.4
(1.1)
1.6
(0.5)
(1.7)
% Change
(4.6)
(4.7)
(1.7)
(2.0)
7.0
1.1
1.6
1.5
% Change
28.3
17.0
18.4
32.9
22.8
29.5
33.1
35.0
160
150
140
130
120
110
100
90
80
5/23/03
7/08/03
8/19/03
10/01/03
NASDAQ
(1) Based on Friday closing prices.
11/12/03
DJIA
12/26/03
2/10/04
S&P 500
3/24/04
5/06/04
Piper Jaffray
Consumer M&A Weekly
Consumer Mergers & Acquisitions
David Jacquin - Managing Director, Group Head, 415-277-1505, david.m.jacquin@pjc.com
Tom Halverson - Principal, 612-303-6371, j.t.halverson@pjc.com
John Barrymore - Vice President, 415-277-1501, john.a.barrymore@pjc.com
May 24, 2004
Scott LaRue - Managing Director, 650-838-1407, r.s.larue@pjc.cm
John Twichell - Vice President 415-277-1533, john.t.twichell@pjc.com
Robert Arnold - Associate, 415-277-1548, robert.c.arnold@pjc.com
This report is published by the Mergers & Acquisitions Group within the Investment Banking Department of Piper Jaffray.
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