Samara Capital, a private equity firm, in collaboration with a group of investors including Convergent Finance, is setting up a roll-up platform for packaged foods with a dedicated investment of $150 million. According to insiders familiar with the initiative, the strategy involves pursuing mergers and acquisitions in the mid-sized packaged foods sector through bolt-on or tuck-in acquisitions, as well as fostering organic growth. Additionally, the firm intends to secure licensing agreements to introduce international food brands to the Indian market.
The platform will be similar to Sapphire Foods, a venture previously established by Samara Capital for food services. Sapphire Foods currently manages KFC and Pizza Hut, two quick-service restaurant (QSR) chains under Yum! Brands, within the Indian market.
The Samara Capital-backed platform, to be called Agro Tech Foods, has begun with Sundrop edible oil, peanut butter and ACT II popcorn as its first brands.
Last week, Samara and Convergent Finance announced their agreement to collectively acquire a 51.8% stake in the listed food manufacturer Agro Tech Foods (ATFL) from its Chicago-based parent company, Conagra Brands Inc, for INR 650 crore.
Convergent Finance LLP and Samara Capital to acquire 51.8% stake in Agro Tech Foods for $78 Million
“Samara sees Agro Tech as a base on which to build growth in packaged foods, with more mid-sized brands housed under the Agro Tech Foods umbrella. The platform will explore M&As in adjacent categories which are synergistic to the core business of ATFL,” one of the executives said.
The platform will prioritize organic growth in scalable western-style convenience food categories and majority investments, with a focus on areas like capex and distribution. Conversely, less emphasis will be placed on categories such as chocolates and breakfast cereals, which are already saturated.
“The platform will also look at licensing more global brands into ATFL and is already in conversation with some global brands that are looking to enter India,” according to the executives mentioned above.
Samara Capital declined to comment on specific plans for its new platform.
“We intend to create a large and unique branded food platform in the country with this acquisition,” Manish Mehta, managing director and co-chief investment officer at Samara Capital, said in a statement while announcing the deal with Conagra Brands last week.
Agro Tech Foods currently boasts a distribution network spanning 4.6 lakh outlets and operates six plants throughout India. Nonetheless, the company has experienced a decline in performance in its core categories of popcorn, spreads, and edible oils in recent years, which has deterred investors. Conagra attempted to sell the company two years ago, conducting a thorough process through an investment bank, but failed to find any buyers due to stagnant growth and declining margins.
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