February 28, 2007

Food Industry Merger & Acquisition Activity Rebounding, Says The Food Institute

In 2006, 348 mergers & acquisitions were completed in the food industry - and an additional 102 were announced, but not yet completed by the end of the year, according to The Food Institute's Food Business Mergers & Acquisitions 2006. Activity was up 7.7% from 2005, but still remains 13.6% below the total five years ago. Food Processors accounted for nearly one-third of the total number of mergers & acquisitions closed in 2006, while Investment Firms & Banks accounted for nearly one-fifth of the transactions during the year, according to The Food Institute, which has been tracking merger & acquisition activity for over 25 years.

"Investment firms & banks were the winner in this year's race for mergers & acquisitions," noted Danielle Breuel, Research & Education Director at the Elmwood Park, NJ-based trade association. "Transactions carried out by companies in this category clearly contributed to the overall increase in food business mergers & acquisitions in 2006. Purchases made by Restaurant firms and Supermarkets also played a significant role in the overall increase, with activity in these sectors of the industry bouncing back from a lull in 2005," she added. "The magnitude of consolidation among food retailers could continue in 2007, with two key transactions already announced: Whole Foods Market Inc. agreed to acquire natural and organic foods retailer Wild Oats Markets; and warehouse store operator and foodservice supplier Smart & Final Inc. entered into a definitive merger agreement to be acquired by an affiliate of private equity firm Apollo Management, L.P."

Food Business Mergers & Acquisitions 2006, available from the Food Institute, contains a listing of merger & acquisition activity in over 25 different categories ranging from food processors and restaurants to retailers and investment firms & banks. This publication gives the specifics of each of the deals that took place in 2006, plus an overall comparison of the activity over the past five years, providing valuable insight into one of the most influential aspects of the food industry.

Examining the data by category, considerable increases in merger & acquisition activity in 2006 compared to the prior year were seen in the Investment Firms & Banks, Restaurants, and Retailers (namely Supermarkets and Convenience Stores) sectors. Investment Firms & Banks completed a total of 65 acquisitions in 2006, and an additional 23 were announced, but not yet closed at the end of the year. This is the highest number of transactions since the Food Institute began tracking Investment Firms & Banks as a separate category in 1998. It is also well above the 43 and 48 mergers & acquisitions in 2005 and 2004, respectively. Notably, in 2006 some 36 of the purchases made by investment firms involved a restaurant company (27 completed; 9 pending closure), up from 16 completed mergers & acquisitions of restaurant firms or assets in 2005. Investment firms also targeted supermarkets in 2006.

Acquisitions made by Restaurant firms increased from 24 in 2005 to 39 completed transactions in 2006, plus another nine that were still pending completion at the end of the year. Meanwhile, in the retailing sector, mergers & acquisitions made by Supermarkets jumped to 21 completed, plus 15 pending, up from just nine completed deals in 2005. Meanwhile, purchases completed by Convenience Stores reached 32, with another 10 pending closure, up from just 10 transactions completed in 2005.

The Food Processors category, which is broken down into several sub-categories, maintained the level of activity it experienced in 2005. Some 99 mergers & acquisitions were completed by Food Processors overall, and an additional 24 were announced, but not yet closed by the end of 2006. Among the sub-categories listed under Food Processors, Meat Processors completed 13 acquisitions, up from five in 2005 - the highest increase among food processors in terms of number of transactions compared to the previous year.

For more information about Food Business Mergers & Acquisitions 2006 or to pre-order the publication, please contact Danielle Breuel, Research & Education Director at 201-791-5570 ext. 216 or [email protected] *Members of the media can call to request a complimentary table detailing the number of transactions in each category over the past five years.

About The Food Institute

The Food Institute is a nonprofit organization with a single purpose: providing information. The Food Institute strives to be the best "single source" for current, timely and relevant information about the food industry from "farm to fork." The association serves as a trusted source of information, providing balanced coverage of the issues. It delivers information through multiple media so that industry professionals worldwide can tap in when and how they choose. For more information, visit, www.foodinstitute.com.