Adapted from a press release:
Marel agreed to acquire Wenger Manufacturing, a processing equipment manufacturer focused on pet food, plant-based proteins and aqua feed. The acquisition of Wenger is a platform investment into new, complementary and attractive growth markets for Marel. Pet food processing equipment will form the fourth business segment alongside poultry, meat and fish. The acquisition is subject to customary closing conditions such as anti-trust and approval of Wenger’s shareholders. The deal is expected to contribute approximately 10% of Marel’s total revenues and 12% of EBITDA.
“The Wenger acquisition is in line with our vison of a world where food is produced sustainably and affordably,” Arni Oddur Thordarson, CEO of Marel, said in a press release. “Throughout the years, Marel has gradually expanded its playing field. This platform acquisition will add the fourth business segment to our business model, in addition to the poultry, meat and fish segments, where we are a global leader in processing solutions, services and software. On a proforma basis, the new segment will account for around 10% of revenues and 12% of combined EBITDA. We see immediate opportunities for growth and value creation by leveraging Marel’s global reach and digital platforms in Wenger’s sizable addressable markets. The two companies have complementary technologies and a product portfolio that will accelerate the journey to become full-line providers in the respective fields.
The total investment for the acquisition is US$540 million. Thereof, US$530 million is the purchase price on a cash and debt-free basis (enterprise value). The remaining US$10 million is a combination of a contribution to a not-for-profit private foundation, to continue the legacy of Wenger and its meaningful impact on the community, as well as Marel shares for Wenger employees.
The purchase price will be paid with cash at hand and existing credit facilities. Discussion with selling shareholders regarding partial consideration in Marel shares is ongoing and will be concluded prior to closing. The transaction will also result in expected tax benefits of USD 60-70 million and the adjusted transaction multiple corresponds to around 14x EV/EBITDA.
Marel has complementary product portfolios and geographic presence with Wenger’s extrusion and dryer technology focused on the high growth markets of pet food, plant-based proteins and aqua feed.
Founded in 1935, Wenger has 500 employees and revenues in 2022 are expected to be US$190 million, EBITDA US$32 to 35 million, and EBIT margin 14 to 15%.
According to Petfood Industry’s Directory of Suppliers, Wenger extrusion systems are recognized around the world as the premier choice for pet food production. The company’s equipment line includes 14 sizes of extruders – both single screw and twin screw with capacities as high as 22 tonne/hour. In addition, Wenger designs and manufactures horizontal dryers and toasting ovens, enrobing equipment, and ancillary hardware, all of which may be computerized, integrated and automated for complete process management.
Profitability forecasts of pet food industry acquisition
Total investment for the acquisition is US$540 million. Pro-forma leverage following completion of the acquisition is estimated at around 3x net debt to EBITDA, in line with Marel’s targeted capital structure of 2-3x net debt to EBITDA. The acquisition is fully in line with Marel’s 2017-2026 growth strategy which targets 12% average annual increase in revenue through a balanced mix of organic and acquired growth.
The two companies have a strategic and cultural fit with complementary product portfolios and geographic presence, creating a platform to enhance further growth. Wenger has a diversified and loyal customer base ranging from blue-chip pet food processors to startup companies in plant-based proteins. This has resulted in healthy profitability, strong cash flow and solid return on invested capital.
The addressable market for Marel and Wenger in solutions and services within pet food, plant-based proteins and aqua feed is estimated to be around EUR 2 billion with expected annual growth of 4 to 6%, in line with Marel’s long-term market growth expectations. Marel aims to grow faster than the market, based on its continuous innovation and global reach.
More on Marel
Throughout the years, Marel has gradually expanded its playing field and is now the only pure-play provider of full-line solutions, software, and services to the poultry, meat, and fish industries. In the vision solidified in 2016, the scope was widened from the three animal proteins to focus more generally on transforming food processing. In 2020, Marel announced an increased focus on adjacent markets and in 2021 it formally established a business development division focused on pet food and plant-based proteins. Adding Wenger’s strong capabilities in that area, Marel is accelerating its journey and is well positioned to capitalize on providing transformational solutions to the large and attractive growth markets of pet food, plant-based proteins, and aqua feed.
Marel sees great opportunities and is committed to invest in the combined business to accelerate growth. The acquisition is expected to be margin and earnings enhancing. Planned initiatives include expanding manufacturing capacity to respond to high demand in Wenger’s core markets. Aftermarket revenues represent over 40% of Wenger’s revenues, and Marel’s global reach and digital platform will support a more proactive aftermarket approach to better service customers around the world.
The acquisition will be financed through Marel’s strong balance sheet and existing credit facilities. To preserve operational headroom, Marel has signed a EUR 150 million bridge facility from BNP Paribas Fortis SA/NV. Assuming a full cash payment, pro-forma leverage following completion of the acquisition is estimated to be around 3x net debt/EBITDA, compared to Marel’s targeted capital structure of 2-3x net debt/EBITDA.
The closing of the acquisition is subject to customary closing conditions, including anti-trust and shareholder approval of Wenger, which is expected to take place during Q2 2022.
