June 27, 2022
Welcome back, readers.
🗓 Situational awareness: Join us tomorrow at 12:45pm ET for conversations with Eva Press, a vice president within Meta's global business group who will discuss the social media giant's retail plans, and Jonathan Duskin, CEO of activist hedge fund Macellum, who will dish on the 2022 proxy season. Register.
1 big thing: Consumer staples M&A is down by half
The total value of announced deals in the consumer staples sector, which includes Mondelez's $2.9 billion acquisition of Clif Bar, is down by nearly half compared to last year, according to Refinitiv data, Richard writes.
- The number of transactions is also down, with 190 so far this year compared to 270 at this point last year.
Why it matters: Consumer staples companies are typically seen as a haven for investors during periods of stock market volatility and recessions — as people always need to eat and wash.
- We've yet to see an M&A bump materialize this year — in contrast to the flurry of deal activity in the retail space. Buyers and sellers are in price discovery mode and facing headwinds such as labor and inventory shortages.
Yes, but: According to a food and beverage M&A report from Kroll, public companies and PE firms (among others) are sitting on large piles of cash, which will likely drive M&A transactions.
- "Given some of the macro headwinds and fears of a recession currently permeating the market, we believe the food and beverage industry will remain an attractive, defensive sector for investment and acquisitions," the firm said.
What's next: Potential deals in the food space could help lift those numbers.
- Kellogg said it could sell its plant-based food business, which is anchored by the Morningstar Farms brand that helped establish the category almost five decades ago and has $340 million in sales. (Kellogg announced last week it’s splitting itself into three separate publicly traded divisions.)
- TreeHouse Foods is in talks to sell its meal prep business to PE firm Investindustrial for $1.3 billion (more on that below).
What we're watching: Look for other CPG and food conglomerates such as Unilever, which recently named activist investor Nelson Peltz to its board, to evaluate their portfolios.
- Peltz has a history of breaking up companies, including pushing Kraft to spin off its snacks division (which we know today as Mondelez) in 2012 with the backing of fellow investor Warren Buffett, as one of many examples.