Heinz expands holdings
PITTSBURGH (AP) – H.J. Heinz Co., the nation’s largest ketchup maker, agreed Monday to buy the HP Foods and Lea & Perrins sauce divisions from France’s Groupe Danone for $852 million, in a move that one analyst says positions Heinz to possibly gain global control of the sauce market. Heinz believes the acquisition will make the company “the sauces leader” in Britain. Danone’s sauce brands, marketed primarily in Britain, the U.S. and Canada, accounted for close to $292 million in revenue last year, Danone said.
As part of the deal, Heinz gets condiments including Lea & Perrins Worcestershire sauce, HP Sauce, and Rajah spices as well as a license to manufacture Danone’s Amoy brand of Asian sauces in Europe.
Heinz Chairman and CEO William Johnson said the acquisition is in line with the company’s goal to strengthen business in the sauce sector.
“This acquisition underscores our commitment to become a faster-growing, more focused company,” he said.
John McMillin, an analyst with Prudential Equity Group, said in a research note that the deal also positions Heinz for more growth.
“We sense (Danone) will sell Amoy in the months to come and perhaps (Heinz) will try to gain global control, but that price may also be a full one,” McMillin said.
Danone said it still plans to sell Amoy, its Asian sauces arm, but decided it would get a better deal for shareholders by selling it separately. Amoy has annual sales of about $85 million and is breaking even, Danone said.
“The sale of the sauce division tolls the bells for the Amoy business in Asia,” Danone Chief Financial Officer Emmanuel Faber said. “It should also be disposed of as a noncore business for us.”
The transaction brings Danone closer to its objective of refocusing activity on three main businesses: fresh dairy products; drinks and bottled waters; and biscuits. Danone’s products include Evian and Volvic bottled water, Dannon yogurts and LU cookies.
Besides controlling 60 percent of the U.S. ketchup market, Heinz makes food brands including Ore-Ida frozen potatoes and Weight Watchers dishes. Heinz reported net income of $752.7 million, or $2.13 per share, on sales of $8.91 billion in its latest fiscal year, which ended April 27.
Shares of Heinz rose 1 cent to close at $36.34 in late Monday trading on the New York Stock Exchange. U.S. shares of Danone fell 44 cents, or 2.4 percent, to $17.81 on the NYSE.