Reports suggest private equity outfit Permira planned to raise the cash from a bond issue, intending to channel most of it back to investors. However, the terms were not attractive enough to warrant continuing.
One industry source told FoodNavigator Iglo Foods, which owns the Birds Eye brand and is a well-known frozen ready meal manufacturer, remained in a strong position, with capital of €260m poised to invest internally and in potential acquisitions.
“We have taken the decision with Permira not to pursue Iglo Group’s partial refinancing," said Martin Glenn, chief executive of Iglo Group. "For us it is ‘business as usual’, as we move forward on our strategy for the next phase of our growth. In Permira we have a very supportive owner, committed to building on our strong performance to date.”
Permira itself has hammered out another three year plan for Iglo, with a view to reassessing the situation after that.
Top on Iglo Foods’ list of potential acquisition targets is understood to be Findus France, with its owner, private equity group Lion Capital, asserting that Iglo could make the purchase. “Iglo Foods is looking to increase its footprint in Eastern and Western Europe,” said one source.
Iglo Foods is known to be performing strongly in markets such as the UK and Italy, although it is struggling in the Benelux countries.
Several bidders were rumoured to be interested in buying Iglo Group, including trade buyers. However, only a joint bid between Blackstone Group and BC Partners emerged out of the bidding process as having potential. The two are believed to have tabled a lower bid than was expected as a result of the lack of competition and for this reason it was subsequently rejected by Permira.
Clive Black, financial analyst at Shore Capital in the UK, told Food Navigator the market was becoming tougher for private equity firms to generate cash from some sectors of the food industry. “Private equity thought the frozen food market was a very stable source of cash flows, but there’s a very high level of debt there. European frozen food has become a commoditised market."
He said in some sectors the current economic climate made the straightforward process of private capital groups buying food firms at low value and profiting from sales in three to five years extremely difficult. “The era of this kind of easy financial engineering has come to an end.”
He suggested Permira might need to reappraise Iglo Foods’ value.