Piper Jaffray
Consumer M&A Weekly
August 2, 2004
Consumer Mergers & Acquisitions
Murray Huneke- Managing Director, Group Head, 650-838-1388, murray.c.huneke@pjc.com
Scott LaRue - Managing Director, Head of Consumer M&A, 650-838-1407, r.s.larue@pjc.cm
Tom Halverson - Principal, 612-303-6371, j.t.halverson@pjc.com
John Twichell - Vice President 415-277-1533, john.t.twichell@pjc.com
John Barrymore - Vice President, 415-277-1501, john.a.barrymore@pjc.com
Robert Arnold - Associate, 415-277-1548, robert.c.arnold@pjc.com
Selected Consumer M&A Transactions
(Approximate valuations, $ in millions)
Date
Announced
Effective
Target
Acquiror
Better Brands of Atlanta
United Distributors
Equity
Value
Enterprise
Value
Pending
Retail
Investor Group to acquire Mervyn's from Target Corporation
Pending
Sidney Bernstein & Son Lingerie, Movie Star
NA
NA
NA
NA
Apparel
Movie Star to acquire Sidney Bernstein & Son Lingerie, Inc.
07/28/04
Pending
"Joya" drink brand (Arca)
NA
$57.0
NA
NA
Food & Beverage
Mexican bottler Arca to sell "Joya" drink brand to Coca-Cola
07/27/04
07/27/04
Future Food LP
American Capital Strategies
NA
$1,200.0
NA
NA
NA
Comments
07/29/04
Investor Group
NA
Universe
07/29/04
Coca-Cola Co.
NA
EV / LTM
EBITDA
Pending
Mervyn's
NA
LTM
EBITDA
07/30/04
NA
NA
NA
NA
Food & Beverage
United Distributors to acquire Better Brands of Atlanta
Food & Beverage
American Capital Strategies has acquired Future Food
07/26/04
07/27/04
Silhouette Brands
Dreyers Grand Ice Cream
NA
$65.0
NA
NA
Food & Beverage
Dreyers Grand Ice Cream to acquire Silhouette Brands
07/26/04
07/26/04
Spyder Active Sports
Apax Partners
NA
$100.0
NA
NA
Apparel
Apax Partners has acquired skiwear company Spyder Active Sports
07/23/04
Pending
3 Albertsons Stores
Kroger
Kroger to purchase 3 Albertson's stores in the Omaha area
NA
NA
NA
Food & Beverage
NA
$775.0
NA
NA
Consumer Products
$383.5
$397.7
$43.4
9.2x
Food & Beverage
Ebro Puleva to acquire Riviana Foods, a maker of branded rice products
NA
NA
NA
NA
Food & Beverage
Molson and Coors Announce Merger of Equals
NA
$1,350.0
NA
NA
Food & Beverage
Associated British Foods to acquire units of Australia's Burns Philp group
Jacob's Bakery & Irish Biscuits Lt United Biscuits
NA
$438.0
NA
NA
Food & Beverage
Huffy Sports
Russell Corp.
NA
$30.0
NA
NA
Leisure & Entertainme Russell Corp has acquired the assets of Huffy Sports from Huffy Corp
Milk Products of Alabama
National Dairy Holdings
NA
NA
NA
NA
Food & Beverage
07/23/04
Pending
Pentair - Power Tools
Black & Decker Corp
07/23/04
Pending
Riviana Foods
Ebro Puleva
07/22/04
Pending
Adolph Coors Co.
07/22/04
Pending
Yeast, bakery & US spice units
07/19/04
Pending
07/19/04
07/19/04
07/15/04
Pending
Molson Inc
Associated British Foods
NA
Black & Decker to acquire Pentair Inc.’s power tools group
United Biscuits to acquire Jacob's Bakery & Irish Biscuits from Danone
National Dairy Holdings to acquire Milk Products of Alabama
Note: Figures per public filings and press releases.
M&A Spotlight Transactions
July 22, 2004 - Molson and Coors Announce Merger of Equals to Create World's Fifth Largest Brewer
All M&A Transaction Multiples
(LTM Data as of 12/31/03)
Adolph Coors Company (NYSE: RKY) and Molson, Inc. (TSX: MOL.A) announced Thursday a definitive agreement to combine in a merger of equals that
will create a new company with the operating scale and balance sheet strength to take a leading role in the consolidating global brewing industry.
With combined beer sales of 60 million hectoliters (51 million U.S. barrels), Molson Coors Brewing Company will be the world's fifth largest brewing company
by volume, with pro-forma combined net sales of US$6.0 billion, EBITDA of US$1.0 billion and free cash flow of US$707 million for the twelve month period
ended March 31, 2004. In addition, the combination is expected to generate approximately US$175 million in annualized synergies by 2007, with half of these
benefits achieved within 18 months following completion of the merger. The transaction is expected to be earnings accretive(1) to the shareholders of both
companies within the first full year of combined operations.
15.0x
10.7x
13.2x
10.7x
11.0x
8.6x
9.0x
7.0x
The transaction brings together Coors, founded in 1873, and the third- largest brewer in the U.S. with an 11 percent market share, and the second- largest
brewer in the U.K. with a market share of 21 percent, with Molson, North America's oldest beer company, founded in 1786 and Canada's leading brewer with a
43 percent market share, and the third-largest brewer in Brazil, where it has an 11 percent market share.
"This transaction allows us to create a stronger company in a consolidating global industry while preserving Molson's rich heritage as North America's oldest
beer company and Canada's leading brewer," said Eric H. Molson, chairman of Molson. "We are extremely pleased to be combining with Coors, one of the
world's most respected brewers, in such a strategically compelling merger. We look forward to working together to realize the full potential of the new
company."
13.5x
12.4x
13.0x
9.7x
6.9x
6.0x
5.1x
5.0x
3.0x
< $25
$25 - $100
$100 - $250
$250 - $1,000
>$1,000
Transaction Size
EBIT
EBITDA
Peter H. Coors, chairman of Coors, said: "I am very proud to see the company started by my great-grandfather more than 130 years ago combine with a
company of Molson's caliber and heritage. This historic transaction combines 350 years of brewing excellence and will create a dynamic and competitive
organization able to deliver long-term value to shareholders while continuing to be an important contributor to the communities in which we operate."
The combined company will have a well-established beverage portfolio that includes Coors Light, (the No. 7 beer brand worldwide), Molson Canadian (the No.
1 brand in Canada) and Carling (the No. 1 brand in the U.K.). In addition, Coors Original, Keystone, Aspen Edge, Zima XXX, Worthington's, Molson Ultra,
Export, Molson Dry, Rickard's and Kaiser will be important brands in the portfolio. Additionally, the companies have, in various geographies, distribution
and/or licensing agreements with other leading international brewers, including Heineken, Grupo Modelo, Grolsch, FEMSA, Foster's and SABMiller.
Summary of the Transaction
The transaction will be structured pursuant to a Plan of Arrangement under which each share of Molson held by a Canadian resident will be exchanged, at the
election of the holder, for exchangeable shares in a Canadian subsidiary of Molson Coors and/or shares of Molson Coors. Molson shares held by nonresidents
of Canada will be exchanged for Molson Coors stock. The transaction is structured to be tax deferred to all U.S. holders of Coors, tax deferred to Canadian
resident Molson shareholders who properly elect to receive exchangeable shares, and taxable to U.S. holders of Molson shares and those Canadian resident
Molson shareholders who choose to convert to Molson Coors stock.
Under the proposed Plan of Arrangement, each Molson Class B voting share will convert into shares having the right to exchange for 0.126 voting share and
0.234 non-voting share of Molson Coors and each Molson Class A non-voting share will convert into shares that have the right to exchange for 0.360 nonvoting share of Molson Coors.
Source: Company Press Releases.
Recent High Yield Debt and Convertible Securities Issued by Consumer Companies
Announced
Issued
07/28/04
07/23/04
06/24/04
06/24/04
05/24/04
04/06/04
03/30/04
03/30/04
03/24/04
03/17/04
03/09/04
03/05/04
Not Priced
Not Priced
07/01/04
06/30/04
05/27/04
04/14/04
04/06/04
04/06/04
03/25/04
03/25/04
03/16/04
03/10/04
Source: Bloomberg, Public Press
Company
Issue Description
Smithfield Foods
Duane Reade
K2 Corporation
Pierre Foods Inc.
Leiner Health Products
Vicorp Restaurants
Prestige Brands Inc
Sealy Mattress
Real Mex Restaurants
American Achievement
Mrs. Fields
Gold Kist Inc
$400.0 mm HY notes (144a)
$195.0 mm HY notes (144a)
$200.0 mm HY notes (144a)
$125.0 mm HY notes (144a)
$150.0 mm HY notes (144a)
$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)
Moody's /
S&P
Coupon
Maturity
Ba2 / BB
B3 / CCC+
Ba3 / BB
B3 / BB3 / CCC+
B3 / B
Caa1 / CCC+
Caa1 / BB2 / BB3 / BB3 / CCC+
B2 / B-
7.00%
9.75%
7.38%
9.88%
11.00%
10.50%
9.25%
8.25%
10.00%
8.25%
11.50%
10.25%
2011
2011
2014
2012
2012
2011
2012
2014
2010
2012
2011
2014
Business Description
Pork processor and producer of hogs. Also produces and markets branded food products
Operator of a durgstore chain in metropolitan New York.
Designer, manufacturer and marketer of sporting goods, recreational and industrial products
Producer of food products for schools, foodservice, vending and convenience stores
Manufacturer, marketer and distributor of vitamins, minerals and nutritional products
Operator & franchisor of mid-scale family restaurants, under Bakers Square and Village Inn names
Marketer of consumer product brands Prell®, Chloraseptic®, Clear eyes®, Murine® & Comet®
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
Piper Jaffray
Consumer M&A Weekly
August 2, 2004
Consumer Mergers & Acquisitions
Murray Huneke- Managing Director, Group Head, 650-838-1388, murray.c.huneke@pjc.com
Scott LaRue - Managing Director, Head of Consumer M&A, 650-838-1407, r.s.larue@pjc.cm
Tom Halverson - Principal, 612-303-6371, j.t.halverson@pjc.com
John Twichell - Vice President 415-277-1533, john.t.twichell@pjc.com
John Barrymore - Vice President, 415-277-1501, john.a.barrymore@pjc.com
Robert Arnold - Associate, 415-277-1548, robert.c.arnold@pjc.com
The Private Equity/ LBO Sponsor Corner
Date
07/29/04
07/27/04
07/26/04
07/10/04
07/14/04
07/07/04
07/06/04
06/25/04
06/21/04
06/08/04
06/08/04
06/03/04
06/02/04
Target
Financial Sponsor
Summary of Transaction
Mervyn's
Future Food LP
Spyder Active Sports
MacFarms of Hawaii (Processing Assets)
Walls Industries
Shoes for Crews
Vista International Packaging
Shells Seafood Restaurants
Peds
Como Sport
Ames True Temper
Jillian's (9 restaurants)
Home Products International
Investor Group
American Capital Strategies
Apax Partners
The Shansby Group
Brazos Private Equity Partners
Advent International
Keystone Capital
Investor Group
Winston Partners
Windsong Allegiance Group
Castle Harlan Inc
Gemini Investors Inc.
Management Buyout
Sun Capital Partners, Inc., Cerberus Capital Management, L.P. and Lubert-Adler and Klaff Partners, L.P. to Acquire Mervyn's from Target Corporation
American Capital Strategies to acquire Future Food, a producer and marketer of refrigerated dips, spreads and seafood salads
Apax Partners has acquired skiwear company Spyder Active Sports maker of technical skiwear used by professional skiers and ski enthusiasts
Mauna Loa, a portfolio company of The Shansby Group, has agreed to acquire MacFarms of Hawaii's macadamia nut processing and marketing assets
Brazos Private Equity Partners has acquired work wear and sporting apparel company Walls Industries
Advent International has led a $120 million recapitalization of restaurant employee shoe company Shoes for Crews
Keystone Capital has completed the acquisition of Vista International Packaging, a food packaging subsidiary of Hormel Foods
An outside investor group has agreed to acquire a significant ownership stake in Shells Seafood Restaurants
International Legwear Group, a portfolio company of Winston Partners, has acquired Peds
Windsong Allegiance Group, a stable of apparel brands, including Joe Boxer and Pivot Rules, has acquired sportswear manufacturer Como Sport
Castle Harlan has agreed to acquire garden-equipment maker Ames True Temper Inc. from Wind Point Partners for $380 million
Jillian's to sell most of its remaining assets including 19 upscale restaurants and "billiard-type" urban clubs to Gemini Investors and CEO Dan Smith
A management buyout group led by current Chairman and CEO James R. Tennant has agreed to acquire housewares company Home Products Intl
Private Equity/LBO Analytics
SPREAD (LIBOR) FOR LEVERAGED BUYOUTS SENIOR BANK LOANS
By Deal Size
BUYOUT FUNDS RAISED
$ in Billions
$70
Basis Points
$63.3
$55.4
$60
450
400
409
363
350
300
277
250
251
200
1996
316
306
264
242
1997
257
309
294
344
334
357
353
406
$50
328
$40
$30
238
1998
$34.5
$18.4
$20
1999
2000
L e ss tha n $ 1 0 0 M illio n
2001
2002
2003
Q1 04
$10
$ 1 0 0 M illio n to $ 2 5 0 M illio n
$5.3
$6.0
1992
1993
$36.9
$34.5
$24.0
$23.2
$17.0
$11.7
$5.8
$0
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 15 transactions completed in the equity capital markets last week raising a combined $2.2 billion. Deal activity consisted of 6
IPOs, 7 follow-ons and 2 convertibles. IPO activity consisted of 2 technology, 2 financial, 1 health care and 1 REIT transaction. All 6 IPOs
traded flat in the aftermarket, finishing +0.4% through week’s end. Follow-on activity consisted of 6 shelf takedowns and 1 conventional
marketed transaction. On average, follow-on offerings traded down 13% in registration, but finished the week up 7% in the aftermarket.
The Week Ahead
Theree are 22 deals expected to price this week including 14 IPOs, 7 follow-on offerings and 1 ADRs. Issures look to raise a combined $3.6
billion.
Close as of
Weekly
YTD
LTM
7/30/2004
1,887
10,140
1,102
551
228
366
220
251
% Change (1)
2.0
1.8
1.4
2.2
(0.1)
2.6
3.2
0.8
% Change
(5.6)
(2.6)
(0.5)
(0.9)
6.2
1.4
7.7
9.0
% Change
10.3
11.2
12.9
17.9
17.6
14.7
33.8
22.9
160
Broader Market Activity
The major market indices were up for the week. The Dow Jones increased 178 pts, or 1.8%, and closed at 10,140. The Nasdaq rose 38 points,
or 2.0%, and closed at 1,887. The S&P 500 gained 16 points, or 1.4%, and closed at 1,102. The Russell 2000 increased 12 points, or 2.2%,and
closed at 551.
150
140
130
120
110
100
90
80
8/01/03
9/15/03
10/27/03
12/09/03
NASDAQ
(1) Based on Friday closing prices.
1/23/04
3/08/04
DJIA
4/20/04
S&P 500
6/02/04
7/16/04
Piper Jaffray
Consumer M&A Weekly
August 2, 2004
Consumer Mergers & Acquisitions
Murray Huneke- Managing Director, Group Head, 650-838-1388, murray.c.huneke@pjc.com
Scott LaRue - Managing Director, Head of Consumer M&A, 650-838-1407, r.s.larue@pjc.cm
Tom Halverson - Principal, 612-303-6371, j.t.halverson@pjc.com
John Twichell - Vice President 415-277-1533, john.t.twichell@pjc.com
John Barrymore - Vice President, 415-277-1501, john.a.barrymore@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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