Josh Sosland: Parsing takeover possibilities for baking industry
February 2, 2010
In a recent interview with Milling & Baking News, a prominent stock market analyst suggested a new wave of merger and acquisition activity could emerge in food processing.
Such speculation gains credibility in light of the multi-billion dollar transactions announced in recent months — Nestle’s acquisition of the Kraft frozen pizza business and Kraft’s takeover of Cadbury. Still, when analyzing prospects for stepped-up m.&a. activity, painting the food processing industry with too broad a brush doesn’t make sense, particularly when thinking about how wholesale baking may be affected.
For instance, the scale created by Mars acquisition of Wrigley and the pending Kraft/Cadbury deal well could lead certain remaining confectionery makers to consider partnering with another company. Similarly, the massive investments being made internationally by food companies could prompt like partnering by companies lacking the ability to meaningfully expand their non-U.S. footprint.
Generally speaking, though, such considerations do not resonate for wholesale baking. Given the industry’s current state, it is not far-fetched to imagine large U.S. baking companies making major acquisitions in the years ahead. But deliberations leading to such deals are likely to be quite different from those swirling around the food processing industry at large.