Food Service & Agriculture, Manufacturing, and Retail

Food maker acquiring Brazilian company for $429M

October 14, 2016
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Kellogg Company is based in downtown Battle Creek. Photo via flickr.com

A food maker in the region has entered into an agreement to acquire an investment firm that is the controlling shareholder of a leading Brazilian food group.

Battle Creek-based Kellogg Company, the cereal and snack food maker, said yesterday it will acquire Ritmo Investimentos, which is the controlling shareholder of Parati S/A, Afical Ltda and Pádua Ltda — or collectively the Parati Group.

The acquisition by Kellogg, through its subsidiary Pringles Serviços e Comércio de Alimentos Ltda, is subject to customary closing conditions and is expected to close in late 2016. 

The purchase price is R$1.38 billion, or roughly US$429 million at current exchange rates, and it will be an all-cash transaction. 

To preserve financial flexibility, Kellogg said it intends to reduce its expected share repurchases in 2016 to $450-$550 million, versus previous guidance of $700-$750 million. 

Kellogg said the acquisition, which is its largest in Latin America, furthers two of its strategic priorities — “becoming a global snacking powerhouse and expanding its presence in emerging markets.”

Brazilian portfolio

John Bryant, Kellogg chairman and CEO, said Parati Group has an “outstanding portfolio” of popular consumer brands.

He also said with Brazil being the largest economy in Latin America, the acquisition will allow Kellogg to accelerate its growth and improve its margins in the region.

Parati Group sells a wide range of "iconic" regional brands, including Parati, Pádua, Minueto, Zoo Cartoon and Hot Cracker biscuits, which make up about half of the company's business.

The rest of the business is comprised of Trink powdered beverages, Parati Lamen instant noodles and Parati dried pasta.

Parati Group's net sales are expected to be about R$600 million, or about US$190 million at current exchange rates.

"Opportunity"

Parati Group has 3,200 employees, including a sales force of about 1,300 people serving about 60,000 customers directly. This includes a strong presence in small to medium — or high frequency — stores in Brazil, which are "critical" to reaching the country's growing population.

The company also has five distribution centers and two production facilities with room for expansion.

Maria Fernanda Mejia, president of Kellogg Latin America, said the combination of Parati Group's portfolio, sales and distribution capabilities with Kellogg's global resources — which she said include innovation expertise, extensive shopper insights and customer marketing strength — will provide “tremendous opportunity.”

International deals

The acquisition announcement marks Kellogg's fourth emerging market acquisition in the last two years.

In that time, Kellogg has acquired companies in countries in each of its international regions, including Bisco Misr and Mass Food Group in Egypt and a 50-percent stake in Multipro in Nigeria and Ghana.

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