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M&A Insights into the Retail & Consumer industry 2012/13

With our analysis of global transaction activities, we keep you informed of industry current trends and developments.


With our analysis of global transaction activities, we keep you informed of industry current trends and developments.


Published by PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft

By Gerd Bovensiepen

August 2013, 24 pages, 7 figures, 5 tables, Softcover

All rights reserved. Reproduction, microfilming, storing or processing in electronic media is notpermitted without the permission of the publishers.

The information contained in this publication was intended for our clients and correct to the best ofthe authors’ knowledge at the time of publication. Before making any decision or taking any action,you should consult the sources or contacts listed here. The opinions reflected are those of theauthors.

© August 2013 PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, which is a member firm of PricewaterhouseCoopers International Limited (PwCIL). Each member firm of PwCIL is a separate and independent legal entity.

M&A Insights into the Retail & Consumer industry 2012/13 5

Preface

Preface

In the first edition of our analysis series on deal activity in the Retail & Consumer industry, we present you with the mergers and acquisitions (M&A) scenario that has transpired in the industry during 2012 and the first half year of 2013 and set out our expectations for deal activity for the second half of 2013, pointing out global and regional developments.

2012 has been not so encouraging for the global economy, which faced multiple challenges such as the eurozone crisis and US economy’s slow recovery. Under these circumstances the overall quantity of M&A deals1 in the sector slipped by around 3% compared to 2011, while the value of M&A deals in 2012 fell by 15% down to $243.2 billion.

The Food and Beverage sector dominates the deals market. More than one third of all 2012 transactions, with eight out of the ten biggest deals, took place in this sector.

Deal-activity volume in the eurozone2 exceeded the prior year’s level by 45%; however, the total amount of transactions did not reach last year’s figures. In BRIC countries deal activities declined by 7% in 2012, especially in Brazil where the total amount of transactions collapsed more than one third. Nevertheless the trend to invest in emerging markets continues, with China above all being the target country for investors.

Although the first quarter of 2013 showed an overall positive trend of M&A activities, in the first half year 2013 a declining development could be seen. In the second half of 2013 we expect a continuing increase of deal activity in Asia, with intra-Asian deals gaining in importance. Four out of the ten biggest transactions in the first half of 2013 occurred in Asia, in three of which both acquirers and target companies were Asian.

Despite ongoing economic tensions in Europe we look forward optimistically to M&A activities. Restrained private consumption in the countries of the European Union – except Germany and Great Britain – increases pressure on companies to open up new markets and market segments and to transform their business models.

We expect strategic investors to continue investing in Food and Beverage as a result of further national and international market consolidation.

We wish you a pleasant and insightful read and hope our analysis provides you with an informative overview of M&A developments and trends in the Retail & Consumer industry.

If you would like to receive further information please do not hesitate to contact us.

Gerd Bovensiepen

1 This includes only deals amounting to $50 million and more.2 Euro currency zone.

6 M&A Insights into the Retail & Consumer industry 2012/13

Contents

Figures .....................................................................................................................7

Tables .......................................................................................................................8

A Introduction ......................................................................................................9

B Analysis ...........................................................................................................101 An overview of global M&A deals in Retail & Consumer ..................................102 First half of 2013 deal activity below prior year ...............................................123 BRIC deals slightly declining ...........................................................................134 Deal activities in the Food and Beverage space dominate the market ............... 145 Strategic Investors dominate deal activities .....................................................176 Eurozone’s M&A activities suffering from euro crisis .......................................187 Mega deals .......................................................................................................198 Macroeconomic indicators ..............................................................................219 Methodology ...................................................................................................21

Contacts .................................................................................................................22

Contents


Figures

Figures

Fig. 1 Number of global M&A deals in Retail & Consumer (2011–H1 2013) .........................................................10

Fig. 2 Regional allocation of M&A transactions in Retail & Consumer in BRIC countries (2011–H1 2013) .............................13

Fig. 3 Allocation of number of M&A transactions by industry of target companies (2011–H1 2013).......................................... 14

Fig. 4 Allocation of number of M&A transactions by sector of target companies (2011–H1 2013) .........................................15

Fig. 5 Allocation of number of non-Retail & Consumer M&A transactions by sector of target companies (H1 2013) .....................16

Fig. 6 Allocation of number of M&A transactions by investor type and sector (2011–H1 2013) ............................................ 17

Fig. 7 M&A activities in eurozone by number and value of deals (2011–H1 2013) .................................................................18


Tables

Tables

Tab. 1 Cross-border M&A transactions in Retail & Consumer in Europe (2012 and H1 2013) ...................................11

Tab. 2 Number and value of global M&A deals in Retail & Consumer (Q1 2010–Q2 2013) ....................................................12

Tab. 3 Top ten M&A deals in Retail & Consumer

in 2012 (by deal value in billions of $) ......................................................19

Tab. 4 Top 10 M&A deals in Retail & Consumer in H1 2013 (by deal value in billions of $) .................................................20

Tab. 5 Macroeconomic indicators ........................................................................21


Introduction

A Introduction

In the following Retail & Consumer deals market activities have been analysed in the context of global and regional developments in 2012 and the first half of 2013. Current trends and forecasts for the second half of 2013 will also be provided.

Upon detailed inspection of deal activity in the BRIC countries it becomes clear that the trend of investing in emerging markets will continue. In observing deal activity according to industry sectors, the analysis also reveals that the Food and Beverage sector is dominant, which is reiterated at the end of the report in the list of the latest mega deals.

Furthermore, the proportion of deals based on investor type is investigated, which clearly shows that strategic investors currently drive the deals market.


Analysis

B Analysis

1 An overview of global M&A deals in Retail & Consumer

Overall a trend of declining Retail & Consumer M&A activities could be seen in 2012 on the global market, which especially reflects activities in Europe and South America. Europe’s deal volume fell by 4% in 2012 compared with 2011, comprising 180 deals. However, a different behaviour is clearly visible: whereas intra-European transactions declined by more than one fifth, European outbound activities grew by around 65%. Asia (25 deals) and North America (21 deals) were leading areas for European investments abroad, showing an uncertain confidence in the European market attributable to the euro crisis.

Local Inbound Outbound

Source: PwC analysis of Thomson Reuters M&A data.

Fig. 1 Number of global M&A deals in Retail & Consumer (2011–H1 2013)

2011 2012 H1 2013

North America

107 118

3228

52

1730

2011 2012 H1 2013

Europe

114

3934

9041

34

56

2011 2012 H1 2013

AsiaPacific

177

2329

17390

3631

2011 2012 H1 2013

South America

43

17

24

16

7

2011 2012 H1 2013

Africa

4

6

8 6

43

22


Analysis

Asia continues to function as a deal hotspot comprising a peak of 240 deals in 2012. This trend remained consistent in the first half of 2013, represented by the 111 already announced deals.

Activities in Asia and North America3 rose slightly compared to 2011, which can be seen in increased inbound deals and results mainly from corresponding outbound deal development in Europe. Overall local transactions remain focal point of M&A activities in every region, a tendency which continued into the first half of 2013.

Tab. 1 Cross-border M&A transactions in Retail & Consumer in Europe (2012 and H1 2013)

Crossregional deal activity 2012

IntraEurope

European acquirer

European target

Net inbound (outbound) Total

Number of deals 90 146 124 (22) 360

Total deal value(in millions of $)

33,740 77,063 64,638 (12,425) 175,441

Average deal value(in millions of $)

375 528 521 565 487

Crossregional deal activityH1 2013

IntraEurope

European acquirer

European target

Net inbound (outbound) Total

Number of deals 41 50 48 (2) 139


19,039 27,149 21,296 (5,854) 67,484


464 543 444 2,927 485

Europe – outbound deal activity 2012

North America South America Asia & OceaniaAfrica &

undisclosed Total

Number of deals 21 8 25 2 56


20,167 1,828 20,552 776 43,323


960 229 822 388 774

Europe – outbound deal activityH1 2013


undisclosed Total



2,231 121 5,657 102 8,110


558 121 1,886 102 901

3 See PwC LLP (ed.), US retail and consumer M&A insights – 2012 year in review and 2013 outlook, 2013.


Europe – inbound deal activity 2012


undisclosed Total



2,434 0 6,454 99 8,987


152 0 380 99 264

Europe – inbound deal activity H1 2013


undisclosed Total



182 0 190 244 616


36 0 190 244 88


Despite strong activity in the last quarter of 2012, total deal volume seen in 2011 was not reached in 2012. A total of 533 deals were announced in the Retail & Consumer industry, representing a value of $243.2 billion, which is a 3 and 15% decrease in amount and value compared to 2011.

The total number of deals in Q2 2013 marginally exceeded Q1, but stays far behind the prior year’s figures. Deal volume first halves of both 2012 and 2013 has not reached 2011 figures. While deal value in the first quarter of 2013 was relatively high, amounting to $70.8 billion, the figures of first half of 2013 in total lag behind those of 2012

2 First half of 2013 deal activity below prior year

Tab. 2 Number and value of global M&A deals in Retail & Consumer (Q1 2010–Q2 2013)

2010 2011 2012 2013

Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2

Number of deals 108 101 142 148 499 141 131 139 140 551 100 141 127 165 533 111 114

Total deal value(in billions of $)

58.7 30.1 62.2 62.5 213.5 78.0 61.1 101.1 44.6 284.6 27.2 97.3 49.6 69.1 243.2 70.8 50,0

Average deal value(in billions of $)

0.5 0.3 0.4 0.4 0.4 0.6 0.5 0.7 0.3 0.5 0.3 0.7 0.4 0.4 0.5 0.6 0.4


Analysis


3 BRIC deals slightly declining

Fig. 2 Regional allocation of M&A transactions in Retail & Consumer in BRIC countries (2011–H1 2013)

Origin of target

Total

China

Brazil

India

Russian Fed

4699

107

3555

59

921

33

29

7

014

8

Total

China

Brazil

Russian Fed

3375

85

2744

52

617

25

06

4

08

4India

Origin of acquirer

H1 2013 2012 2011


Deal activity in BRIC countries measured by origin of the target company declined 7% in 2012. Nevertheless the trend to invest in emerging markets continues, with China above all being the target country for investors. In 2012 more than half of all transactions in BRIC countries occurred in China, and in the first half of 2013 deal activity has been announced already which corresponds to two thirds of 2012 activity.

While transactions in Brazil collapsed by more than 40%, deals in Russia and India increased significantly, but remain low compared to 2011, reflecting in origin of target and acquirer and showing increasing interest of investors in these regions.

Analysis


4 Deal activities in the Food and Beverage space dominate the market

Allocation of number of M&A transactions by industry shows an equal loading throughout the years: almost half of all transactions are allotted for the Consumer sector while nearly one third account for the Retail sector. As producers of consumer goods open up new market segments and regions by deal transactions, the retail sector is rather growing organically.

Consumer Retail Other

Fig. 3 Allocation of number of M&A transactions by industry of target companies (2011–H1 2013)

31%

21%

48%

21%

34%

45%

20%

29%

51%

2011 2012 H1 2013


Analysis


Fig. 4 Allocation of number of M&A transactions by sector of target companies (2011–H1 2013)

Retail Discount and Department Stores7%

Retail Food and Beverage16%

Retail Internet and Catalogue 2%

Consumer Apparel8%

Retail other9%

Consumer Food and Beverage35%

Household and Personal Products4%

Consumer other14%

Retail Computers and Electronics2%

Retail Apparel3%

2011

2012

Retail Discount and Department Stores 7%


Retail Internet and Catalogue4%

Consumer Apparel10%

Retail other10%



Consumer other15%


Retail Apparel3%

H1 2013

Retail Discount and Department Stores 10%


Retail Internet and Catalogue2% Consumer Apparel

9%

Retail other10%



Consumer other14%


Retail Apparel3%


Analysis


The Retail & Consumer industry is largely driven by Food and Beverage transactions: more than half of all deals are accounted for by this sector. Nevertheless, the tendency is toward decline (44% in H1 2013 compared to 51% in 2011). This dominance is also reflected in the top ten deals in 2012: eight out of the ten biggest transactions have occurred within the Food and Beverages sector, among these were the top two mega deals in 2012. Transactions in the Retail Discount sector are taking on greater significance, covering 10% of all deal activity in the first half of 2013. This development results from greater price-consciousness among consumers. The Apparel sector by contrast shows itself to be relatively saturated, with around one tenth of target companies consistently being on the retail and production side.

Retailers and producers of consumer goods acquire companies from other industries relatively often, which accounted for a total of 21% of all deals in the industry in the first half of 2013. In the second half of 2012 Retail & Consumer companies were most active in the real estate sector; however, purchases were principally spread across various sectors.


Other29%

Food and Related Products 4%

Fig. 5 Allocation of number of non-Retail & Consumer M&A transactions by sector of target companies (H1 2013)

Electronic and Electrical Equipment 4%

Real Estate and Realestate Financing

19%

Business Services6%

Investment and CommodityBrokers, Dealers and Exchanges

6%

Pharmaceutical/Drug Stores 8%

Mining8%

Agriculture, Forestry and Fishing 6%

Utilities (Electricity, Gas and Water)4%

Wholesale Tradedurable Goods6%

Analysis


5 Strategic Investors dominate deal activities

Deal activity in the Retail & Consumer industry is largely driven by strategic investors, whose participation in three fourths of all transactions in 2011 and 2012 makes it clear that companies are focusing on expanding their strategic business alignment. Financial investors became more important in the first half of 2013, being involved in just under one third of all transactions; notably the two biggest deals in the first six months of 2013 (H.J. Heinz and D.E Master Blenders) are attributed to financial investors.

Developments over the last two years show that financial investors are concentrating on the Food and Beverage sector, accounting for more than one half of all transactions across this industry’s sectors. Notable changes have been seen in Apparel and Footwear, as the number of deals with involvement of financial investors increased 21% compared to the prior year. The current year’s transactions in this sector already amount to ten deals.

Fig. 6 Allocation of number of M&A transactions by investor type and sector (2011–H1 2013)

Strategic investor Financial investor

26.5

73.5

28.9

71.1

25.5

74.5

2011 2012 H1 2013

in % Number of deals with involvement of financial investors by sub-sectors

2011 2012 H1 2013

Apparel, Footwear and Accessories 17 21 10

Food and Beverage (including alcohol)

38 36 42

Grocery, Drug and Discount Stores, Largescale Retail

45 36 0

Household and Personal Products 5 6 5

Internet/Ecommerce 4 6 0

Other consumer products 20 20 8

Specialty retail/other (electronics, home improvement, auto repair, etc)

17 11 0


Analysis


6 Eurozone’s M&A activities suffering from euro crisis

Fig. 7 M&A activities in eurozone by number and value of deals (2011–H1 2013)

79 78

53

86

22 19

2011 2012 H1 2013

Deal activity by number of deals

37.7

32.1

22.6

45.3

13.010.7

2011 2012 H1 2013

Deal activity by value of deals (in billions of $)

Eurozone target Eurozone acquirer


M&A activities in the eurozone clearly show that since 2011 the industry’s confidence in the European market has declined. While 2011 showed an equal balance between eurozone targets and acquirers, activity by number of deals (–33%) and by value (–40%) fell off drastically in 2012. However, the total value of deals with eurozone acquirers in 2012 was $45.3 billion, which greatly exceeds the prior year’s $32.1 billion.

In the first half of 2013 involvement of eurozone ventures on overall M&A activities has lagged far behind the prior’s year level. Furthermore eurozone acquirers have become less active. We expect continued restraint in the development of deal activity within the eurozone for the second half 2013.

Analysis


7 Mega deals

The year’s two largest deals took place in Food and Beverage reaching a total volume of around $30 billion, the biggest amounting to one third of this volume.

Both top deals for 2012 have already been completed: Anheuser-Busch Inbev acquiring Mexico’s market leading brewery Grupo Modelo S.A.B. de C.V. and the world’s largest Food and Beverage company Nestlé’s acquisition of Pfizer Nutrition, a manufacturer and wholesaler of nutrition products for children. Whereas, the third placed acquisition of Alliance Boots, a Swiss health and beauty retailer and pharmaceutical wholesaler by Walgreens has not been finalised yet.

Tab. 3 Top ten M&A deals in Retail & Consumer in 2012 (by deal value in billions of $)

Month Target Target Nation

Acquirer Acquirer nation

Status Deal volume in billions of $

Sector

JunGrupo Modelo S.A.B. de C.V.

MexicoAnheuserBusch

InbevMexico Completed 18.00

Food and Beverage

Apr Pfizer Nutrition United States Nestle SA Switzerland Completed 11.85Food and Beverage

JunAlliance Boots

GmbHSwitzerland Walgreen Co United States Intended 9.49

Other Retailing

SepFraser & Neave

LtdSingapore

Thai Beverage PCL

British Virgin Islands

Completed 6.90Food and Beverage

JunAlliance Boots

GmbHSwitzerland Walgreen Co United States Completed 6.67

Other Retailing

OctCocaCola

Hellenic Bottling Co

GreeceCocaCola

Hellenic Bottling Co

Greece Completed 5.74Food and Beverage

NovRalcorp

Holdings IncUnited States

ConAgra Foods Inc

United States Completed 4.98Food and Beverage

MayGavilon Group

LLCUnited States Marubeni Corp Japan Pending 4.60

Food and Beverage

JulAsia Pacific

Breweries LtdSingapore L‘Arche Green NV Netherlands Completed 4.34

Food and Beverage

AprStarbev

Management Services

Czech Republic

Molson Coors Brewing Co

United States Completed 4Food and Beverage


Analysis


Tab. 4 Top 10 M&A deals in Retail & Consumer in H1 2013 (by deal value in billions of $)

Month Target Target nation

Acquirer Acquirer nation

Status Deal volume in billions of $ Sector

Feb H.J. Heinz Co United StatesInvestor

GroupUnited States Completed 23.48

Food and Beverage

MarD.E Master

Blenders 1753 BV

NetherlandsDonata

Holdings SENetherlands Pending 8.28

Food and Beverage

JunCanada

Safeway LtdCanada Empire Co. Ltd Canada Pending 5.68

Food & Beverage Retailing

AprHindustan

Unilever LtdIndia Unilever PLC United Kingdom Pending 5.44

Household and Personal Products

AprSiam Makro

PCLThailand CP ALL PCL Thailand Pending 4.22


AprGD Midea

Holding Co LtdChina

Foshan Shunde Midea Invest

China Pending 3.40Household and

Personal Products

JanNew Albertsons

IncUnited States

AB Acquisition LLC

United States Completed 3.30Food &

Beverage Retailing

Feb ICA AB SwedenICAhandlarnas

Forbund ABSweden Completed 3.13


FebCia Cervecera

de CoahuilaMexico

Constellation Brands Inc

United States Completed 2.90Food and Beverage

AprSiam Makro

PCLThailand CP ALL PCL Thailand Intended 2



The Food and Beverage sector has continued to dominate deals in the first half of 2013 as well, this being marked by the finalised top deal: H.J. Heinz Co being acquired by an investor group for around $23 billion. Intra-Asian deals have gained in importance as four out of the ten biggest transactions in the first half of 2013 were Asian, three of them with both Asian targets and acquirers.

Analysis


8 Macroeconomic indicators

Tab. 5 Macroeconomic indicators

Germany France UK EU USA Japan

Real GDP growth (in %)

1.62 –0.44 1.68 0.57 1.85 3.07

Retail sales growth (in %)

0.39 –1.39 1.88 0.21 4.31 0.85

Real private consumption growth (in %)

0.77 –0.09 0.31 0.15 0.65 0.89

Source: Corporate Finance – Consumer & Retail PwC’s Weekly Menu, week 28.

9 Methodology

This report is an analysis of deals occurring worldwide in the Retail & Consumer industry. Included in the analysis were all of the mergers, corporate purchases and sales, leveraged buyouts, privatisations and minority stake purchases with transaction volumes amounting to $50 million and more, announced between January 1st 2010 and June 30th 2013, for which either the acquirer or target fall into one of the following sectors: Apparel Retailing, Computers and Electronics Retailing, Discount and Department Store Retailing, Food and Beverage Retailing, Food and Beverage, Home Furnishings, Home Improvement Retailing, Household and Personal Products, Internet and Catalogue Retailing, Other Consumer Products, Other Consumer Products, Other Consumer Staples, Other Retailing, Textiles and Apparel, and Tobacco.

Analysis


Contacts

Gerd BovensiepenPartner, Leader Competence Center Retail & ConsumerTel: +49 211 [email protected]

Wolfgang FreyM&A Retail & Consumer Tel: +49 69 [email protected]

Dr. Christian WulffTransactions Retail & ConsumerTel: +49 40 [email protected]

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