Who will buy Moy Park?

By Rachael Porter

Moy Park is up for sale again – just two years after it was bought by Brazilian parent firm JBS for 1.3 billion Euros. Who’s going to buy it? And what does the sale mean for the future of the business – and its 12,000 UK employees.

Since the announcement in mid-June the official company line has been ‘business as usual’. It has also revealed that the sale, just some 18 months after it was purchased, is part of a debt reduction exercise for its parent company JBS. Brazilian company JBS has announced a ‘programme of divestment’ focused on strengthening its financial position through net debt reduction.

Fire sales such as these occur, “when a company is under extreme pressure and needs to raise some cash – and fast,” a food industry analyst told Poultry Business.

But who is able to buy such a large company, particularly one with a huge potential price tag? Even though there’s some ‘urgency’ to the sale, he says that Moy Park would not ‘sell at any price’.

“JBS will be looking for a good price – one that’s close to what it paid for the company back in 2015. Yes, it will have to take a hit – it paid 1.3 billion Euros – taking on a debt of 300,000 Euros and paying one billion Euros. I’d be surprised if JBS settled for less than a billion.

Price tag

“In terms of a buyer, I’m struggling to think of a UK company that’s big enough to do a deal of this size – Moy Park is a large company with a big price tag. And I’ve not seen any signs of any UK interest – I really can’t see Boparan or Cranswick taking it on,” he adds.

“A private equity buyer would seem more likely – they would certainly have the cash. And there are many big firms out there with plenty of money to spend. Blackstones, for example, springs to mind. It has experience of buying food companies and it’s one of the largest private equity firms. But does it have the appetite to invest in another food producing company?”

There’s certainly evidence to suggest that food companies can be turned around – and with considerable success. Northern Ireland’s Karro Food Group, for example, was snapped up by London-based investment group CapVest, in a deal estimated to be worth around £180 million. The deal marked something of comeback story for Karro, which was formed when it split from Vion Food Group in late 2012.

Under the ownership of private equity firm Endless, Karro managed a turnaround that saw it move from being a loss-making company and into profit within the space of just two years.

Foreign interest

“It’s key that any private equity investor is able to see an ‘exit – that they will be able to sell on the company once they’ve ‘rescued’ it and increased its value. That’s not always easy with companies as large as Moy Park. If a private equity firm was to buy it and turn it around – who will buy it from them in the future? Where is the exit?” our food industry analyst continues.

“I think that, realistically, the interest will come from abroad – possibly the US. A big international player is a most probable. But the US has yet to make any purchases on this scale in the UK. That said, there’s always a first time.

“With this in mind, the Far East is looking like a probable potential buyer. They certainly have the money to spend and they are always looking for opportunites to invest in the UK.”

Promar International’s divisional director John Giles agrees and adds that the UK food sector is still an attractive prospect, despite Brexit. “And if an overseas-based buyer – possibly from China, Saudi Arabia or India – bought Moy Park I wouldn’t be surprised. These countries are extremely interested in food production and manufacturing and they also have the money to invest.”

He adds that, with at least 13 of the UK’s top 20 food companies having a degree of foreign ownership, such a move wouldn’t be out of the ordinary. “It’s nothing new. And a company like Moy Park – well known, well invested and well run – would be attractive to any company looking for a foothold in the UK.”

Profitable business

“It’s still a profitable, strong company – well run and with plenty of potential to increase productivity,” adds the anonymous analyst. “It’s a ‘cash generating business’ and that’s what private equity firms like,” he says. “They also like brands and fast-growing companies. Anything where they see they can make a return on their investment. And I think Moy Park is a business that can grow and gain value.”

Not everyone is so positive, not least some of the 12,000 company employees and, particularly, those based in Northern Ireland. Moy Park is the largest employer in the country. Sean McKeever, Unite’s regional officer for Moy Park in Northern Ireland, says that workers need assurances about their future. “Political leaders have a responsibility to ensure that the business is not subject to corporate asset-stripping by venture capitalists,” he says. 

“The announced sale of the company has cast a shadow over its future at a time when it already faces extensive uncertainties, due to Brexit. And we are seeking assurances that any new owner will demonstrate their long-term commitment to our 3,000 members in the company.

Employees concerned

McKeever says that members are concerned that the sale, coming so soon after the previous acquisition by JBS and the second sale in just seven years, may open the door to venture capitalists. “The fear is that they would have no interest in the workforce but would buy the company for its order book, intent on asset-stripping the business for short-term profit.”

That said, he asserts that the company is profit generating – to the tune of between £25m and £50m each year. “And Moy Park is very much taking the ‘business as usual’ approach, that it promised in its formal statement when the sale was first announced.”

“Moy Park is a successful and growing food business, with a solid financial standing,” says Moy Park chief executive Janet McCollum. “I have no doubt that our success is due to the great strengths of this business – our exceptional people, innovation and performance. I also know that this will ensure our continued growth and stability well into the future.

“Our priority remains business as usual – delivering outstanding quality, innovation and service to our customers and consumers.”

Chinese delegation

That all sounds positive and it is the theme of on-going discussions between Unite and Moy Park. And McKeever also reveals that a Chinese delegation visited Moy Park’s sites in Northern Ireland six months ago. “I have that information on good authority. I don’t know why they were there or what the outcome of their trip was but, with rumours circulating that a Chinese company may be interested in buying the company, it could be relevant and I gives our members hope that there is, indeed, an interested buyer.”

John Giles is sure that the company won’t attract asset strippers: “Why would you dismantle a company that’s being managed well and is solvent. It certainly seems to have a clean bill of health.”

Moy Park has also just awarded its employees a 3.4% pay rise: “Certainly not the actions of a company that’s in financial difficulty or one that ignores its responsibilities to its employees,” adds McKeever. “The employees have a good working relationship with their managers and the executive board. And we know, from the meetings we’ve had, that the business is thriving and that it’s also spent a lot of money investing in its suppliers’ poultry units. It really is a state of the art operation and I think that should give employees a degree of confidence in their future, going forward.”

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