Nomad Foods dips into ice cream market with Fortenova’s Frozen Food Business Group acquisition

By Jim Cornall contact

- Last updated on GMT

Ice cream, including Ledo brand Kapri, is a new category to Nomad, and represents approximately 50% of FFBG’s revenues. Pic: Ledo
Ice cream, including Ledo brand Kapri, is a new category to Nomad, and represents approximately 50% of FFBG’s revenues. Pic: Ledo

Related tags: Ice cream, Nomad Foods, acquisition, M&A

Nomad Foods Limited has entered into an agreement to acquire Fortenova Group’s Frozen Food Business Group (FFBG) for aggregate consideration of approximately €615m ($722m) on a debt-free, cash free basis.

FFBG is a European frozen food portfolio operating in attractive markets new to Nomad, including Croatia, Serbia and Bosnia & Herzegovina, Hungary, Slovenia, Kosovo, North Macedonia and Montenegro.

The deal covers Ledo plus d.o.o., Ledo Čitluk d.o.o. and Frikom d.o.o., as well as several smaller affiliated companies.

Its two anchor brands, Ledo and Frikom, have the #1 market share in many of these markets and offer a broad range of frozen food products including fish, fruits, vegetables, ready meals, pastry and ice cream.

Stéfan Descheemaeker, Nomad Foods’ CEO, said, “The acquisition of FFBG reinforces Nomad’s European frozen food leadership while strategically expanding our portfolio into attractive new markets and creating an exciting new category adjacency in ice cream. Like Birds Eye, Findus and iglo, Ledo and Frikom are institutions in their respective markets with strong consumer awareness and #1 market share. Similar to Nomad, FFBG is singularly focused on frozen food, a fantastic category that is aligned with consumer trends including convenience and sustainability. We plan to leverage our combined pan-European scale, commercial expertise and passion for frozen food while harnessing the unique local characteristics and traditions of FFBG’s brands.”

Noam Gottesman, Nomad Foods’ co-chairman and founder, said, “We are delighted to announce this acquisition, which is consistent with our growth strategy and builds on our five-year track record of top-tier shareholder value creation. This transaction provides a natural extension to our existing business and creates a new platform for future expansion within Central and Eastern Europe. It also introduces us to ice cream, an exciting new category which opens new potential avenues for growth. Following the acquisition, our annual revenue will approach €3bn ($3.5bn), nearly doubling the revenue base of Iglo Group, our initial anchor acquisition in 2015. We are proud of what we have accomplished so far, and we believe there is much more to come. We look forward to welcoming the FFBG team into the Nomad family.”

Nomad Foods said the acquisition is strategic and financially impactful for Nomad as it offers expansion into new and attractive central and eastern European markets.

Management said it expects FFBG’s organic growth to be in the mid-single digits range, double the 2-3% organic growth profile of Nomad’s existing business. The acquisition of FFBG will expand Nomad’s portfolio in the attractive region while creating a strategic platform for further expansion.

Nomad Foods said its entry into ice cream creates “an exciting new product adjacency and is seasonally complementary to Nomad’s core savory portfolio,” which is skewed to the winter months (Q1 and Q4).

Ice cream, a new category to Nomad, represents approximately 50% of FFBG’s revenues and will account for approximately 5% of the combined annual revenue base.

FFBG is expected to generate annual revenue and adjusted EBITDA of €279m ($328m) and €53m ($62m), respectively in 2021. Management anticipates the transaction to enhance Nomad’s long-term organic revenue and adjusted EBITDA growth profiles while also being high-single digit percentage accretive to adjusted EPS in Year 1, before synergies. Combined 2021 adjusted EPS is expected to exceed $2.00 per share on an annualized basis.

“This is a transformational transaction for Fortenova Group with all the funds to be used to deleverage the group and deliver a Fortenova Group that is, after many years, financially strong and able to fully invest in all its businesses,”​ said James Pearson, Fortenova Group’s chief financial officer.

 “Our Frozen Food Business Group is the market leader in the region where we operate, and I am glad that we have achieved our main goal in its sales process. The goal was, over and above maximizing value, to conclude this transaction with a strategic partner who will make the maximum contribution to further the development of FFBG and recognize the full value and potential of this business and its people,”​ said Fabris Peruško, Fortenova Group’s CEO and member of the board of directors.

“With completion of this transaction we will fulfil a key prerequisite for the capital structure optimization that will enable strong investment in our businesses and drive their future growth. I am very thankful to all people in the Frozen Food Group and in the Fortenova Group who have worked very hard over the past six months to make this happen. Knowing that our Frozen Food is going to be in very good hands, we are looking forward to cooperating with Nomad Foods as an important future business partner in this region.”

The deal is expected to close in Q3 2021.

Related topics: Manufacturers, Ice Cream, Emerging Markets

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