REG - Hilton Food Grp Plc - Acquisition

Hilton FoodAnnouncement

10/12/2021 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20211210:nRSJ2037Va&default-theme=true

RNS Number : 2037V  Hilton Food Group PLC  10 December 2021

 

 

THIS ANNOUNCEMENT (THE "ANNOUNCEMENT"), AND THE INFORMATION CONTAINED IN IT IS
RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION, DISTRIBUTION OR FORWARDING, IN
WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF
AMERICA, CANADA, AUSTRALIA, JAPAN, NEW ZEALAND OR THE REPUBLIC OF SOUTH AFRICA
OR IN OR INTO ANY OTHER JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A
VIOLATION OR BREACH OF ANY APPLICABLE LAW OR REGULATION.

 

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR
CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY
PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES IN
HILTON FOOD GROUP PLC OR ANY OTHER ENTITY IN ANY SUCH JURISDICTION.

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

10(th) December 2021

 

Hilton Food Group plc

 

Hilton agrees to acquire leading international smoked salmon producer, Foppen

 

Hilton Food Group ("Hilton"), the international multi-protein food business,
is pleased to announce that it has agreed to acquire a leading international
smoked salmon producer, Dutch Seafood Company B.V., which trades as "Foppen"
(the "Acquisition"), expanding its presence in a growing protein category, as
well as entering the US, a new geography for Hilton.

 

Hilton has also today launched an equity placing to raise gross proceeds of
approximately £75 million to part fund the Acquisition, as announced
separately (the "Placing").

 

The announcement follows the recent full acquisition of Dalco, a leading vegan
and vegetarian food manufacturer, the acquisition of Fairfax Meadow, as well
as Hilton's expansion into Hilton Seafood, together with several years of
sustained growth in seafood and plant-based foods by the business.

 

Strategic highlights

 

Foppen is an attractive business which is highly complementary to Hilton:

·    Smoked salmon diversifies Hilton into a protein category with a
strong growth outlook.

·    Foppen is focused on added value speciality smoked salmon products
(e.g. toast salmon) which offer a differentiated portfolio of products.

·    Foppen is expected to significantly enhance Hilton's customer base
through:

o  a number of new customers in the US, a new strategic market;

o  the development of an important existing customer relationship (Albert
Heijn in the Netherlands); and

o  significant cross-selling opportunities to both Hilton and Foppen's
existing international customer bases.

·    Foppen will significantly expand the scale of Hilton's seafood
business with potential to deliver procurement and other savings.

·    Foppen brings two well-invested, dedicated smoked salmon facilities
in Harderwijk, the Netherlands and Preveza, Greece, and an experienced
management team and workforce.

·    Foppen stands to benefit from Hilton's exceptional seafood standards
and record, with 98% of all Hilton fisheries certified to the MSC and active
membership of the UN Global Compact and its Sustainable Ocean Business Action
Platform, as well as governance roles on leading global standards bodies such
as the Marin Trust, Global Gap and the Responsible Fishing Vessel Scheme.

 

Financial and transaction highlights( 1 )

·    Foppen's FY 2021 ended 31 March 2021 actual revenue of €139.7
million, adjusted underlying EBITDA of €10 million.

·    Enterprise value of €90.0 million including adjustments for net
debt and net working capital.

·    The transaction will be funded through:

o  equity placing of approximately £75 million, that will predominantly fund
the Foppen acquisition and partially refinance the previously announced
acquisition of Fairfax Meadow, representing an increase of approximately 8% of
the current issued ordinary share capital of the Company, as announced
separately.

o  balance funded through a committed acquisition bridge facility.

·    The transaction is expected to be accretive to earnings per share in
the first twelve months for Hilton while ensuring net leverage remains below
2.0x ( 2 ).

·    Completion of the transaction is subject to Dutch competition
authority and works council approval.

 

Hilton's CEO, Philip Heffer, commented:

"The acquisition of Foppen is an exceptional opportunity for Hilton and
another step towards our goal of becoming the global protein partner of
choice. More and more consumers around the world are seeking affordable, high
quality, and sustainable protein, and this acquisition will help Hilton take
our offer into new markets and to new global customers for the first time.

 

"Foppen's premium product portfolio and strong customer relationships are a
great fit for Hilton's model, while Hilton's strong ESG credentials in seafood
will make sure our future growth plans are sustainable in every sense of the
word. We welcome Foppen's management and employees and look forward to
delivering profitable growth through the combination of Hilton and Foppen."

 

Andre van der Padt, Foppen CEO, added:

"We are excited by the future prospects of Foppen under Hilton's ownership and
look forward to working with Philip and team. Foppen's offer to customers,
suppliers and employees will be enhanced as part of Hilton Food Group."

 

Notes to editors

 

About Hilton:

 

Hilton Food Group plc is a leading international multi-protein producer,
serving customers and retail partners across the world with high quality meat,
fish, vegan and vegetarian foods and meals.

 

We are a business of over 5,000 employees, operating from 19 technologically
advanced food processing, packing and logistics facilities across 16 markets
in Europe and Australasia.

 

For almost thirty years, our business has been built on dedicated partnerships
with our customers and suppliers, many forged over several decades, and
together we target long-term, sustainable growth and shared value.

 

We supply our customers with high quality, traceable, and assured food
products, with high standards of technical excellence and expertise.

 

About Foppen:

 

Dutch Seafood Company B.V., trading as Foppen, is a leading international
manufacturer of branded and private label premium smoked salmon products. The
business was founded in 1918 by the Foppen family and remains true to its
traditions today by combining craftsmanship and traditional methods of
smoking, with the latest state-of-the-art technology. Foppen's key customers
are major retailers in the US and the Netherlands. Foppen services its
customers from two facilities in the Netherlands and Greece with approximately
500 employees.

 

Conference call details

A webcast conference call for analysts and investors will be held at 8.00am
(UK time) today. The presentation will be followed by an analyst Q&A.

 

To register for this call, please go to the following link:

 

https://www.incommglobalevents.com/registration/client/9548/hilton-food-group-/
(https://www.incommglobalevents.com/registration/client/9548/hilton-food-group-/)

 

 

 For further information please contact:

 Hilton Food Group plc                    Tel: +44 (0) 1480 387214
 Philip Heffer, CEO
 Nigel Majewski, CFO

 Headland Consultancy                     Tel: +44 (0) 20 3805 4822
 Edward Young
 Will Smith
 Joanna Clark

 

Footnotes:

 

 1  The Acquisition constitutes a class 2 transaction under the UK Listing
Rules. For the purposes of LR 10.4.1 R (Notification of class 2 transactions):
the value of the gross assets of Dutch Seafood Company B.V. was €63.7
million at 31 March 2021; the statutory net loss was €0.2 million for the
year ended 31 March 2021; and the sellers are funds managed and controlled by
H2 Equity Partners B.V., a European mid-market private equity fund, and Mr A.
P. van der Padt.

 

 2  Note: This is a target only and this statement does not constitute a
profit forecast. There can be no assurance that the transaction will be
accretive to earnings. Accordingly, this should not be taken as an indication
of estimated or actual future results or levels of indebtedness and potential
investors should place no reliance on this statement in deciding whether to
invest in the Company. The Company's actual results may be positively or
negatively affected by factors beyond the control of the Company.

 

Further information in relation to the Acquisition

 

1.   Introduction

 

The Board announces that it has entered into a conditional agreement to
acquire the entire issued share capital of Foppen. In accordance with the
Listing Rules, Foppen is of such a size relative to the Company that the
Acquisition constitutes a class 2 Transaction.

 

2.   Background to and reasons for the transaction

 

 

Hilton strategy

 

Hilton has a simple, clear and well-defined strategy focusing on the following
four key elements:

 

1.      Growing volumes and extending product ranges supplied and
services provided to existing customers

2.      Optimising use of assets and investing in new technology to
deliver competitive advantage to our customers

3.      Maintaining a vigilant focus on food safety and integrity and
reducing unit costs, while improving product quality and service provision

4.      Entering new territories and markets either with new customers or
in partnership with our existing customers

 

Throughout Hilton's development it has worked closely and collaboratively with
its customers to deliver the strategy outlined above. The Group has grown its
capacity and capabilities through disciplined capital investment and continued
innovation to meet its customers' commercial needs and expanded its range of
services to enhance its customer offering. The Group's successful expansion
into international markets, including recent investments in Australia, New
Zealand and Portugal, are good examples of this successful strategy in
execution. As a result of this strong and growing track record as a trusted
and added value partner to its customers, the Group is working with an
increasing number of its existing customers on plans to expand Hilton's
products, capabilities and capacity.

 

Historically, the Group had been focused on the processing of meat,
principally beef and lamb as well as pork outside the UK, which has continued
to remain at the core of the business. However, in more recent years, the
Group has substantially broadened its capabilities, customer portfolio and
customer reach, through the expansion into other international markets and
product categories (including poultry, fish and vegetarian/vegan products).
The Board sees this as an attractive and sustainable area to develop and grow
Hilton's business, whilst offering significant cross selling potential
underpinned by Hilton's operating capabilities.

 

Reasons for the Acquisition

 

Foppen represents an attractive opportunity to broaden and deepen Hilton's
seafood capabilities and offering to its UK and international customers. The
Acquisition expands the Group's portfolio into smoked salmon with a complete,
differentiated portfolio of standard and specialty products and low-cost
manufacturing capabilities. In addition, the Acquisition expands Hilton's
customer portfolio and geographical reach to North America and Asia including
sales to Costco.

 

Financial effects of the Acquisition

 

It is anticipated that the Acquisition will be earnings enhancing from the
first twelve months with return on invested capital ("ROIC") greater than cost
of capital( 2 ). The Group believes this is an exciting entry into a new,
fast-growing, added-value and high-margin protein category with attractive
medium-term opportunity to drive incremental cross-selling revenues.

 

3.   Summary information about Foppen

 

Background to Foppen

Dutch Seafood Company B.V., trading as Foppen, is a leading international
manufacturer of branded and private label premium smoked salmon products with
proprietary processing capabilities. The business was founded in 1918 by the
Foppen family and remains true to its traditions today by combining
craftsmanship and traditional methods of smoking, with the latest
state-of-the-art technology. Foppen's key customers are major retailers in the
US and the Netherlands. Foppen services its customers from two facilities in
the Netherlands and Greece with approximately 500 employees in aggregate.

 

Since 2020, Foppen has focused exclusively on salmon and increased focus on
its specialty products. In 2018 H2 led a merger of Foppen and Klaas Puul,
creating the Dutch Seafood Company B.V and in 2020 Klaas Puul was sold to
Sykes Seafood resulting in the discontinuation of non-salmon products.

 

Foppen's leading market position:

 

·    Clear market leader in the US in smoked salmon specialties with 61%
of sales in 2021 to US customers.

·    Clear market leader in the Netherlands in smoked salmon specialties
and semi-specialties and overall #2 in Europe in smoked salmon specialties.

·    Long-standing, trusted relationships, built on quality and service,
and premium product portfolio cement position with key customers.

·    The grocery retail market for smoked salmon in the US grew by 29%
from 2019 to 2020 and in the Netherlands grew by 11% in the same period.

 

Foppen's competitive advantage:

 

·    Greek manufacturing with low-cost labour supports structural cost
advantage vs. domestic US processors.

·    Volumes allow for economies of scale in procurement and operational
cost efficiencies.

·    Foppen's management team with significant food industry experience
will be supported by Hilton's Benelux operational teams, UK fish processors
and Group functional experts.

 

Financial summary

 

Foppen has a proven track record of being profitable and cash generative, with
underlying performance improvements. This is largely driven by the increased
focus on smoked salmon specialties and the discontinuation of non-salmon
products, which relate to other seafood species (e.g., shrimp). There has been
limited impact on the business from Covid-19.

 

                                         Year ended 31  Year ended 31

March 2020
March 2021

                                         €m             €m
 Revenue                                 141.9((1))     139.7((2))
 Continuing/underlying revenue((3))      99.0           118.0
 Continuing/underlying EBITDA((3))       2.5            10.1
 Gross assets((3))                       59.6           63.7

(1)  Dutch Seafood Company BV reported statutory revenue adjusted to exclude
the impact of disposals

(2)  Reported within the Dutch Seafood Company BV annual report

(3)  Adjusted to exclude the impact of disposals and discontinued trading
relationships.

 

Current trading in FY22 demonstrates continued underlying growth, particularly
in the US market. Underlying growth continues with volumes accelerating in US
customers. Foppen's trading for the year to date has therefore been ahead of
last year with EBITDA expected to be in line with our expectations.

 

 

4.   Principal terms of the Acquisition

 

The sale and purchase agreement entered into by the Buyer, the Company, and
the Seller on 10 December 2021 sets out the terms of the Acquisition pursuant
to which the Buyer has agreed to acquire Foppen from the Sellers for an
enterprise value of approximately €90 million payable in cash on Completion.
Any amount of leakage will be deducted from the purchase price.

 

Completion of the transaction is subject to Dutch competition authority and
works council approval.

 

 

5.   Financing of the Acquisition

 

Historically, the Company has built up cash balances through strong cash
generation. In addition to the Acquisition, the Board believes there are
significant growth opportunities in the medium term. The Group has decided to
take a prudent approach to financing the Acquisition, which will be funded as
follows:

 

·       Equity placing to raise approximately £75 million, that will
predominantly fund the Foppen acquisition (including a £10m cash injection,
working capital funding) and partially refinance the previously announced
acquisition of Fairfax Meadow

·       Additional funding drawn from a committed acquisition bridge
facility jointly provided by Rabobank and Ulster Bank.

·       This transaction and the previously announced acquisition of
Fairfax Meadow are expected to be accretive to earnings per share in the first
twelve months for Hilton.( 2 )

·       Ongoing process to refinance the Group's debt facilities of
£340 million together with existing net cash balances, which were £96
million at 18 July 2021, in order to provide funds for future capital
investment and the Group's working capital requirements.

 

The Board anticipates making strategic capital investments over the next 3
years:

 

·       Capex to support both growth in the existing business and
customer demand for new facilities.

·       Net debt as a result of this investment program will be within
our historical guidance.

 

 

6.    Important notices

 

The distribution of this Announcement in certain jurisdictions may be
restricted by law. No action has been taken by the Company or Numis that would
permit an offering of the Company's securities or possession or distribution
of this Announcement or any other offering or publicity material relating to
such shares in any jurisdiction where action for that purpose is required.
Persons into whose possession this Announcement comes are required to inform
themselves about, and to observe, such restrictions. The information in this
Announcement may not be forwarded or distributed to any other person and may
not be reproduced in any manner whatsoever. Any forwarding, distribution,
dissemination, reproduction, or disclosure of this information in whole or in
part is unauthorised. Failure to comply with this notice may result in a
violation of the U.S. Securities Act of 1933, as amended, or the applicable
laws of other jurisdictions.

 

Numis, which is authorised and regulated in the United Kingdom by the FCA, is
acting for the Company and for no-one else in connection with the matters
referred to in this announcement and will not be responsible to anyone other
than the Company for providing the protections afforded to clients of Numis,
or for providing advice in relation to the contents of this announcement or
any matters referred to herein.

 

None of the information in this Announcement has been independently verified
or approved by Numis or any of its affiliates. Save for any responsibilities
or liabilities, if any, imposed on Numis by the FSMA or by the regulatory
regime established under it, no responsibility or liability whatsoever whether
arising in tort, contract or otherwise, is accepted by Numis or any of its
affiliates whatsoever for the contents of the information contained in this
Announcement (including, but not limited to, any errors, omissions or
inaccuracies in the information or any opinions) or for any other statement
made or purported to be made by or on behalf of Numis or any of its affiliates
in connection with the Company or the Acquisition or for any loss, cost or
damage suffered or incurred howsoever arising, directly or indirectly, from
any use of this Announcement or its contents or otherwise in connection with
this Announcement or from any acts or omissions of the Company in relation to
the Acquisition. Numis and its affiliates accordingly disclaim all and any
responsibility and liability whatsoever, whether arising in tort, contract or
otherwise (save as referred to above) in respect of any statements or other
information contained in this Announcement and no representation or warranty,
express or implied, is made by Numis or any of its affiliates as to the
accuracy, completeness or sufficiency of the information contained in this
Announcement.

 

No statement in this Announcement is intended to be a profit forecast or
estimate, and no statement in this Announcement should be interpreted to mean
that earnings per share of the Company for the current or future financial
years would necessarily match or exceed the historical published earnings per
share of the Company.

 

This Announcement includes statements that are, or may be deemed to be,
"forward-looking statements". These forward- looking statements can be
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "forecasts", "plans", "prepares", "anticipates",
"projects", "expects", "intends", "may", "will", "seeks", "should" or, in each
case, their negative or other variations or comparable terminology, or by
discussions of strategy, plans, objectives, goals, future events or
intentions. These forward-looking statements include all matters that are not
historical facts. They appear in a number of places throughout this
Announcement and include statements regarding the Company's and the Directors'
intentions, beliefs or current expectations concerning, amongst other things,
the Company's prospects, growth and strategy. By their nature, forward-looking
statements involve risks and uncertainties because they relate to events and
depend on circumstances that may or may not occur in the future.
Forward-looking statements are not guarantees of future performance. The
Company's actual performance, achievements and financial condition may differ
materially from those expressed or implied by the forward-looking statements
in this Announcement. In addition, even if the Company's results of
operations, performance, achievements and financial condition are consistent
with the forward-looking statements in this Announcement, those results or
developments may not be indicative of results or developments in subsequent
periods. Any forward-looking statements that the Company makes in this
Announcement speak only as of the date of such statement and (other than in
accordance with their legal or regulatory obligations) neither the Company,
nor Numis nor any of their respective associates, directors, officers or
advisers undertakes any obligation to update such statements. Comparisons of
results for current and any prior periods are not intended to express any
future trends or indications of future performance, unless expressed as such,
and should only be viewed as historical data.

 

This Announcement is for information purposes only and shall not constitute an
offer to buy, sell, issue, or subscribe for, or the solicitation of an offer
to buy, sell, issue, or subscribe for any securities, nor shall there be any
offer, solicitation or sale of securities in any jurisdiction in which such
offer, solicitation or sale would be unauthorised or unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction. Any failure to comply with these restrictions may constitute a
violation of the securities law of any such jurisdiction.

 

Neither the content of the Company's website (or any other website) nor any
website accessible by hyperlinks on the Company's website (or any other
website) is incorporated in, or forms part of, this announcement.

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  ACQTLBMTMTIMTBB