With 160 deals, IT and ITES was the busiest sector followed by manufacturing and healthcare (47). The banking, financial services and insurance (BFSI) space was third, recording 41 deals. Let's take a look at the biggest mergers and acquisitions in India this year. (Representative image)
Modern Foods, the first Indian public sector undertaking (PSU) to be privatised, has changed hands for the third time.
Mexican bakery giant Groupo Bimbo, which is keen to strengthen its presence in emerging markets, has sealed a deal to acquire the popular bread and bakery brand owned by private equity firm Everstone Capital, people with knowledge of the matter told Moneycontrol.
On June 6, 2020, Moneycontrol was the first to report that Singapore-based Everstone Capital had put Modern Foods, which it acquired in 2015 from HUL, on the block.
“Both parties have signed final agreements and an official announcement is likely to be made soon,” said one of the persons cited above.
A second person confirmed the same adding that “investment bank Investec advised Everstone Capital on the sale process”. The value of the transaction could not be verified.
Both persons spoke to Moneycontrol on the condition of anonymity. Moneycontrol is awaiting an email response from Everstone Capital, Groupo Bimbo and Investec.
WHY IS GROUPO BIMBO BULLISH ON INDIA?
This is Groupo Bimbo’s second acquisition in India in the bread and bakery segment. In May 2017, it acquired a majority stake in Delhi based Ready Roti, which produces packaged bread, pizza bases, and sweet and savory buns, with leading brands like Harvest Gold and Harvest Selects.
The Modern Foods brand has strong recall value and compliment’s Groupo Bimbo’s existing India portfolio. The Mexican firm which operates in 33 countries in North America, South America, Asia and Africa, can get access to the company’s well established distribution channel and sell other products as well.
‘DOUGH’ YOU HAVE IT IN YOU?
Modern Foods competes with other bread brands such as Britannia, Harvest Gold, Nature’s Own and English Oven, among others. Over the years, the brand has diversified from its core bread business to other categories such as cookies, cakes, rusks, sweet fills, pizza bases, batter and mixes.
The company’s consolidated sales as of March 2019 were Rs 390-Rs 400 crores, sources said.
At its peak, Modern Foods enjoyed more than 40 percent share of the bread market in India. Modern Foods products are available nationally in nearly 100,000 stores and are made in 40 factories. It is present in more than 15 states and has a strong presence in south India.
In September 2019, Modern Foods purchased a majority stake in Sonepat, Haryana-based Supreme Baker Pvt Ltd, which produces bread and cookies.
MODERN FOODS: THE JOURNEY SO FAR
Launched in 1965 as Modern Bakeries (India) Limited, the company was rechristened Modern Foods India Ltd (MFIL) in 1982. According to the DIPAM (Department of Investment and Public Asset Management) website, the company went through a minor restructuring in 1991-94 when its Ujjain plant was closed, the Silchar project was abandoned and the production of Rasika drink was curtailed.
The company was referred to the Disinvestment Commission in 1996. In February 1997, the commission recommended 100 percent sale of the company, treating it in the non-core sector.
In September 1997, the government approved 50 percent disinvestment to a strategic partner through competitive global bidding. In October 1998, ANZ Investment bank was named the global advisor for assisting in disinvestment.
In January 1999, the government decided to raise the disinvestment level to 74 percent. HUL emerged as the solo bidder and acquired 74 percent of Modern Foods in January 2000. Two years later, the FMCG giant purchased the remaining stake.
On September 9, 2015, HUL said had sold Modern Foods to Everstone Capital for an undisclosed amount.
A CLOSER LOOK AT EVERSTONE
Everstone, founded by former Goldman Sachs bankers Sameer Sain and Atul Kapoor, is focused on India and South East Asia and has assets in excess of $5 billion across private equity, real estate, green infrastructure and venture capital.
It has invested in more than 30 portfolio companies in the region and its India portfolio includes fast-food chain Burger King (which recently made a blockbuster D-street debut), Indostar Capital Finance & nutraceutical ingredient player OmniActive Health Technologies.
Recently, Everstone sold its customer experience solutions and tech platform 'Everise' to Brookfield Business Partners. Earlier in the year, the PE firm agreed to exit Hinduja group promoted Hinduja Leyland Finance. Moneycontrol was the first to report the fund’s plans to exit the NBFC arm on January 29, 2020.