AVONMORE Foods, which holds a crucial hoard meeting on its proposal to merge with Waterford Foods next week, has made its biggest ever acquisition and will pay a total of £54.2 million for the British cooked meats manufacturer Beni Foods.
The acquisition of Beni, which will be staggered over the next four years, is Avonmore's first acquisition for four years and is part of a strategy to boost its presence in the British cooked meats industry. Beni has two plants at Milton Keynes in the British midlands and is the leading company in the sliced cooked meats market with an established business with retail multiples.
It is understood that Avonmore beat off a rival bid from Unigate for the Beni Foods business. Analysts in Dublin - while surprised at the announcement - expressed satisfaction with both the price being paid and the synergies with Avonmore's existing meats business in Britain. The combination of Beni with Avonmore's existing British business would give Avonmore 35 per cent of the market for prepacked cooked meats, ahead of Unigate which has a 30 per cent share.
Initially, Avonmore is paying £5.4 million for 10 per cent of Beni but has put and call options to acquire the remaining 90 per cent on a phased basis for a total of £48.8 million. Three further tranches of £10.8 million are payable in May, 1998, 1999 and 2000, with a final £16.3 million payable in 2001. Avonmore can exercise its option to acquire the balance of Beni up to next October.
Beni has had dismal trading since it was acquired in a venture capital backed £90 million management buy in two years ago. At that time, the group was generating profits of around £9 million sterling, but these fell to around £7 million sterling in 1995 and plunged to £3.1 million sterling (excluding a £800,000 exceptional charge) last year.
Based purely on the 1996 results, Avonmore is paying a high price for Beni with its margins that year of little more than 3 per cent. But it is understood that Avonmore aims to move quickly to restore margins at Beni in the short term to around 7 per cent and ultimately to over 10 per cent.
It is understood that Avonmore expects Beni to have a neutral impact on earnings this year and be earnings positive from next year onwards. Analysts estimate that Beni will be generating over £4 million profits for Avonmore by 1999.
Avon more's cooked meats operation at Ashmount operates at the lower end of the market while Beni manufactures premium cooked meats. Avonmore currently generates margins of around 7 per cent from the £20 million turnover of its Ashmount business and will move quickly to generate similar returns from Beni.
This would involve moving Avonmore executives into senior management positions at Beni while increasing sales to the multiples and reducing costs at the two Milton Keynes plants. Avonmore can also provide secure supplies of pigmeat from its Irish pig factories.
Beni pioneered the introduction of wafer thin sliced cooked meats in Britain and sells a range of sliced ham and other meat products. The group had sales of £90.9 million sterling last year and net assets at the end of the year totalled £27.3 million sterling.
The acquisition will boost Avonmore's turnover in Britain to £490 million sterling and increase employment by over 800 to 3,400 people.
The acquisition of Beni is part of a clear strategy by Avonmore to become one of the top two players in the British processed meats industry. That strategy has been put into place irrespective of the outcome of the merger proposal that has been put to and rejected by the Waterford board. The Avonmore board meets next Monday to decide on its response and on whether to increase its offer.
