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Michael Poole

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Industry Trends

Kellogg Strike Continues as Hundreds of Workers Are Replaced

Over 1,400 Kellogg workers have decided to strike at a ready-to-eat cereal plant because the food giant failed to meet union expectations while negotiating new employment contracts. The company decided that the best course of action was to hire new permanent workers after proposing six different contracts, a move that President Joe Biden denounced as an "existential attack on the union and its members' jobs and livelihoods." The strike has lasted eleven weeks and garnered a large amount of negative publicity for Kellogg, with social media posts urging people to make fake applications that crashed the application website. Kellogg's strike has been the first this year to result in the employer threatening to permanently replace its workforce in the US.1

Dairy-Capital in Trouble

Dairy farmers in California, the nation's leading milk producers, are under stress from rising costs, environmental regulations. Animal feed represents more than 60% of dairy farming costs for 2021, a significant increase from 48% in 2010. A full-grown cow uses roughly 50 gallons of water daily, and California plans to limit water allocation in 2022 to critical health and safety needs only in response to the intense three-year drought. As profit margins continue to fall, the state's $20 billion in annual dairy revenues continues to be threatened as farmers move out of state or completely shut down.2

Justice Department Challenges US Sugar Merger

The Justice Department filed an antitrust lawsuit challenging US Sugar's proposed purchase of competitor, Imperial Sugar, stating that the merger would lead to higher prices for both sugar and food and beverages for consumers. US Sugar farms more than 200,000 acres of sugar cane annually, and Imperial is another top sugar producer in the nation. Although the deal was valued at $315MM, Jonathan Kanter, the antitrust chief, claims that the companies are "seeking to further consolidate an already cozy sugar industry." US Sugar argues that supply chain and production synergies will secure more sugar supply for the US and continue to keep prices low as sugar prices have been steadily increasing this past year.3

US Wheat Exports Slowing and Unable to Compete

In October 2021, US wheat exports dropped by nearly half from September to only 46 million bushels, the lowest monthly export total in more than 30 years. Due to limited domestic supplies and high prices, US wheat is uncompetitive with other major wheat exporters across much of Africa and the Middle East. The forecast for all-wheat exports in 2021/2022 has been reduced by 20 million bushels as exports from June-October experienced a 12% reduction from the same period last year. Further, approximately 53% of total winter wheat growing regions are experiencing drought conditions, driving prices up from reduced yields. A weak pace of sales and shipments through November indicates that a quick turnaround is unlikely.4

Food and Beverage Expands Despite Labor and Supply Shortages

The food and beverage industry has witnessed significant changes throughout the pandemic due to increased consumption and CPG revitalization, but current labor shortages and supply chain issues could slow growth. Over 70 manufacturing expansions were announced or completed before November this year, with food and beverage listed as one of the three most active business areas in industrial construction now. Companies experienced increased sales and are better able to commit to capital expenditures, resulting in new manufacturing plants, major expansions, and much more. However, recent labor shortages in both construction and the food and beverage industry and raw materials shortages have delayed and challenged many new expansions.5

Corn Ranked as Farmer’s #1 Moneymaking Crop

A recent survey of farmers around the country ranked corn as the number one cash crop, with soybeans following closely behind, and ranked wheat as the least preferred crop. Corn was identified as the most profitable crop by 52 percent of respondents followed by soybeans at 32 percent, while wheat garnered a measly 4 percent, cotton garnered 5percent, and forages received 7 percent. Corn's profitability stems from its high prices, which are consistently above $5 in many markets, and its 250 bushels per acre yields. Rising nitrogen prices may change the results in 2022, as corn's margins might shrink while the cost of production increases. 6

Ban on UK Lamb Imports to be Lifted in January 2022

The USDA's 20-year ban on small ruminant imports from the UK to the US will be lifted in January 2022, following the previously lifted ban for beef imports in September 2020. The ban was imposed due to outbreaks of bovine spongiform encephalopathy in the UK. Domestic US beef and lamb producers may have to compete with UK importers, as the first nine months of 2021 saw 1,554 tons of UK beef imported to the US. UK lamb is estimated to be worth over 37 million British pounds over its first five years of trade.7

Farmers Raise Prices and Alter Planting Plans

A global shortage of vital chemicals, such as nitrogen used in fertilizer, has caused operational anxiety among US crop farmers. The shortage is estimated to persist into the spring 2022 planting season, causing many farmers to push back their spring planting plans and warn consumers about potential price increases for their products. Some farmers have elected to focus on less fertilizer-intensive crops like soybeans instead of high-fertilizer crops like corn or wheat, while others say they will reduce fertilizer usage.8

Largest Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • BA Sports Nutrition, LLC
  • The Coca-Cola Company
  • $5,600.00
  • Natural Cheese Business of The Kraft Heinz Company
  • Groupe Lactalis S.A.
  • $3,200.00
  • Harvest Health & Recreation Inc.
  • Trulieve Cannabis Corp.
  • $2,433.72
  • International Wine & Spirits Ltd.
  • Sycamore Partners Management, L.P.
  • $1,200.00
  • Bettera Brands, LLC
  • Catalent Pharma Solutions, Inc.
  • $1,000.00
  • Envigo RMS, Inc.
  • Inotiv, Inc.
  • $590.63
  • First Choice Ingredients, Inc.
  • Koninklijke DSM N.V.
  • $453.00
  • That's How We Roll LLC
  • The Hain Celestial Group, Inc.
  • $259.00
  • Newtown Lane Marketing, Incorporated
  • Appgate, Inc.
  • $158.34
  • Theraplant LLC
  • Greenrose Holding Company Inc.
  • $150.00

Other Financial Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • 212 Rome Street in Newark, New Jersey
  • Cabot Properties, Inc.
  • $21.00
  • PataFoods, Inc.
  • Eat Well Investment Group Inc.
  • $11.60
  • 815 Acres of Missouri Farmland
  • Farmland Partners Inc.
  • $6.50
  • Rustic Bakery, Inc.
  • San Francisco Equity Partners
  • n/a

Other Strategic Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • San Francisco Equity Partners
  • Alpina Productos Alimenticios S.A.
  • $140.00
  • PA Natural Medicine, LLC
  • Ayr Wellness Inc.
  • $120.00
  • Double Diamond Distillery LLC
  • Tilray, Inc.
  • $106.16
  • ZFS Creston LLC
  • Benson Hill, Inc.
  • $102.00
  • ReCept Holdings Inc.
  • Omnicell, Inc.
  • $100.00
  • Shank's Extracts, Inc.
  • Universal Corporation
  • $100.00
  • Beekman 1802 LLC
  • Eurazeo SE; Cohesive Capital Management, L.P.; Cherng Family Trust
  • $92.00
  • Bay, LLC
  • Cresco Labs Inc.
  • $90.00
  • Vessel Brand, Inc.
  • Flora Growth Corp.
  • $76.04
  • Fresh Packaged Salads and Vegetables Business
  • Taylor Farms Retail, Inc.
  • $73.53
  • People's First Choice, LLC
  • Unrivaled Brands, Inc.
  • $71.80

 

Source S&P Capital IQ as of 1/11/2022 and PCE Proprietary Data

PCE Transactions

Contacts

Michael Poole

Orlando Office

407-621-2112 |

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David Jasmund

Orlando Office

407-621-2111 |

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Data Assumptions

This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.

Glossary

EBIT - Earnings Before Interest and Taxes
EBITDA - Earnings Before Interest, Taxes, Depreciation, Amortization
LTM - Last Twelve Months
TEV - Total Enterprise Value

Sources:

  1. Casey, Chris. “Biden denounces Kellogg's plan to replace striking workers.” Food Dive, Industry Dive, 13 Dec. 2021.
  2. Newman, Jessie. “California Dairy Farmers Struggle to Stay in the ‘Got Milk’ State.” The Wall Street Journal, Dow Jones & Company, Inc., 5 Dec. 2021.
  3. Kendall, Brent. “Sugar Industry Merger Challenged by Justice Department.” The Wall Street Journal, Dow Jones & Company, Inc., 23 Nov. 2021.
  4. Sowell, Andrew and Swearingen, Brian. “Wheat Outlook: December 2021.” United States Department of Agriculture, USDA, Economic Research Service, 13 Dec. 2021.
  5. Poinski, Megan. “Why the food and beverage industry is building toward the future in 2021.” Food Dive, Industry Dive, 25 Oct. 2021.
  6. Vogt, Willie. “Which crop is king on your farm?.” FarmProgress, Informa Markets, 13 Dec. 2021.
  7. Reeve, Charlie. “US market to open for UK lamb exports from January.” Farmers Weekly, MA Agriculture Ltd, 6 Dec. 2021.
  8. Thomas, Patrick and Maltais, Kirk. “Surging Fertilizer Costs Push Farmers to Shift Planting Plans, Raise Prices.” The Wall Street Journal, Dow Jones & Company, Inc., 15 Dec 2021.
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