A global private-equity firm has acquired a minority stake in Orkla’s food and ingredients unit, with the enterprise’s total value amounting to Nkr15.5 billion ($1.4 billion).
Rhône, the private equity firm with coffee giant Illy and business-to-business bakery Baker & Baker in its portfolio, will now hold a 40% ownership stake in Orkla Food Ingredients (OFI).
The company headquartered in Norway refuted claims that it had initiated a sales process for its ingredients division in the previous year.
Founded by Orkla in 1999, OFI has most recently disclosed Nkr18.1 billion in sales for the twelve months concluding on September 30, 2023, along with an adjusted EBIT of Nkr1.1 billion.
The food-ingredients division encompasses a wide spectrum of categories, including bakery, pastry, and ice-cream ingredients, as well as plant-based dairy alternatives for consumers. With a presence in 23 countries and a workforce of over 4,000 employees, it maintains a global reach.
The business is structured into three clusters, with ingredients constituting 63% of OFI’s operating revenue, sweet ingredients contributing to 21%, and plant-based products accounting for approximately 17%.
Orkla said in a statement, “By closing of the transaction, OFI will replace existing financing from Orkla with an Nkr6.4bn committed bank facility (not to be fully drawn at closing) with no recourse to Orkla ASA, containing net debt to EBITDA and interest cover covenants.”
The group added, “Inclusive of other adjustment items, the equity value of OFI on a 100% basis is circa Nkr6.5bn. Rhône will have the option, exercisable through 31 March 2027, to acquire an additional 9% of OFI equity at the same price per share as the transaction announced today.”
Orkla and Rhône will each appoint representatives to serve on OFI’s board of directors. The leadership of the board will be entrusted to Øyvind Torpp, the Executive Vice President of Orkla, while Johan Clarin will remain in his role as CEO, overseeing the management of OFI.
Nils Selte, Orkla’s group president and CEO said, “The partnership search for OFI attracted strong interest. I am proud that we are joining forces with a best-in-class organisation in Rhône. The Rhône team’s partnership commitment and strategic attributes clearly stood out.
“This is a landmark deal for Orkla that puts OFI in a position to continue its organic and structural growth journey. This transaction is an example of the flexibility and value-creation ambition that we have sought to create with Orkla’s new operating model.”
Last year, Orkla restructured its operations by dividing them into 12 distinct units, creating opportunities for mergers and acquisitions as well as divestments within the Nordic food group.
“Rhône is pleased to partner with Orkla in this next phase of OFI’s growth. OFI is a market leader across many European countries and in North America, where its differentiated regional and local approach to its customer base is value enhancing,” Patrick Mundt, managing director at Rhône, said.
The transaction is expected to be completed by the end of the first quarter of 2024, subject to customary conditions to closing, including approvals from relevant authorities.
“This transaction is testament to the success, strength and resilience of OFI built over many years. I am very proud that a firm of Rhône’s calibre has decided to invest in OFI and partner with Orkla,” Clarin added.
Orkla also revealed its group third-quarter results today (26 October). Operating revenues increased by 14% to Nkr16.8bn, while adjusted EBIT rose 16% to Nkr1.8bn.
Eight of the 12 portfolio companies reported underlying profit growth, including OFI.
However, OFI’s volumes declined by 1.1% in the third quarter, chiefly in the bakery and ice-cream segments. Generally, the unit’s growth was lower than in earlier quarters of this year.
Orkla also announced today that the CEO of Orkla Foods Europe Paul Jordahl will step down as of the beginning of November. Atle Vidar Nagel Johansen will take up the role temporarily.
Nagel Johansen has been a member of Orkla ASA’s management team since 2012 and is currently EVP and investment executive.