Top brands to merge and form Valeo Foods

SOME OF Ireland’s best-known food brands are set to come together at a new company called Valeo Foods in a multimillion euro deal put together by London-based private equity company CapVest.

Batchelors, famed for its tinned baked beans and peas, is to be merged with Origin Foods, which owns the Odlums, Shamrock and Roma brands, in a deal thought to be worth €140-€150 million.

The transactions is subject to the approval of the Competition Authority.

It is understood that the deal was in gestation for up to 12 months. NCB Corporate Finance advised on the transaction.

Finance was provided by a syndicate of institutions comprising Bank of Ireland, AIB, HSBC, Rabobank and Ulster Bank.

Batchelors has been sold by Cork-based Barry’s Tea, which bought the business six years ago from Northern Foods. It will be merged with Origin Foods, which is being offloaded by Irish listed agri company Origin Enterprises.

Origin said it would receive €26 million in cash from the sale of its foods division along with €35 million in vendor loan notes. It said Origin Foods has an enterprise value of €78 million.

The two companies will be merged into a new entity called Valeo. This entity will be 55 per cent owned owned by CapVest and 45 per cent by Origin Enterprises.

The merged entity will have combined turnover of €200 million and employ about 475 staff.

Peader Kearney, head of Origin Foods, will be chief executive of Valeo, while Aidan O’Byrne, Bachelors head of finance, will be the chief financial officer.

Founded in 1935, Bachelors produces canned baked beans and peas, made famous by the animated duo Barney and Beany.

Other brands include Erin, Squeez, Amigo and Lustre. Mr Kearney said further acquisitions are possible.

“There needs to be more consolidation in the market and we would certainly be interested in participating in that,” he said.

“CapVest has an interest in acquiring more businesses and growing them.”

CapVest has about €3 billion in assets under management. Its investments include a majority stake in the Mater Private hospital in Dublin. It has a long track record of investing in food and beverages, including Findus Group and Punch Taverns, and is seen as a long-term holder of assets.

Its investors include private clients of NCB Wealth Management who participated in a €50 million fund that is backing the Valeo deal.

Commenting on the deal, CapVest’s co-founder Séamus Fitzpatrick said: “The opportunity to create Valeo Foods and bring together a portfolio of some of Ireland’s most iconic and instantly recognisable consumer brands is the realisation of the first stage in a clear strategy to grow Valeo’s footprint in the food sector.”

Origin Enterprises said the transaction would be “marginally earnings dilutive” for the year ending July 31st, 2011.

The cash proceeds will be used to pay down bank debt.