Feltham, England-headquartered Nomad Foods announced on March 29 that that it has entered into an agreement to acquire Zagreb, Croatia-headquartered Fortenova Group’s Frozen Food Business Group (FFBG) for approximately €615 million on a debt-free and cash-free basis.
FFBG is a frozen food brand producer operating in markets new to Nomad, among them Croatia, Serbia and Bosnia & Herzegovina, Hungary, Slovenia, Kosovo, North Macedonia and Montenegro. Its two anchor brands, Ledo and Frikom, have leading shares in many of these countries and offer a broad range of products including ice cream, fish, fruits, vegetables, pastry, pizza and ready meals.
“The acquisition reinforces our frozen food leadership in Europe, while strategically expanding our portfolio into attractive new markets and creating an exciting new category adjacency in ice cream,” said Nomad Foods CEO Stéfan Descheemaeker. “Like our Birds Eye, Findus and Iglo brands, Ledo and Frikom are institutions in their respective markets with strong consumer awareness.
“Similar to Nomad, FFBG is singularly focused on frozen food, a fantastic category that is aligned with consumer trends including convenience and sustainability. We plan to leverage our combined pan-European scale, commercial expertise and passion for frozen food while harnessing the unique local characteristics and traditions of FFBG’s brands.”
Noam Gottesman, co-chairman and founder of Nomad Foods, added: “This acquisition is consistent with our growth strategy and builds on our five-year track record of top-tier shareholder value creation. It provides a natural extension to our existing business and creates a new platform for future expansion within Central and Eastern Europe. It also introduces us to ice cream, an exciting new category which opens new potential avenues for growth.”
Upon finalization of the deal, Nomad Foods’ annual revenue stream will approach €3 billion, nearly doubling the revenue base of Iglo Group, the company’s initial anchor acquisition in 2015. FFBG’s organic growth going forward is expected to be in the mid-single digits range, double the 2-3% organic growth profile of Nomad’s existing business.
Ice cream sales represent approximately 50% of FFBG’s revenues and will account for about 5% of Nomad’s combined annual revenue base. This profitable category is highly synergistic with savory frozen food in FFBG’s core markets and provides Nomad with new category expertise. Furthermore, the seasonal concentration of ice cream profits in the summer months will be complementary to Nomad’s existing frozen savory portfolio, which is skewed to the winter months of Q1 and Q4.
Multiple Levers for Value Creation and Synergies
Nomad’s management sees an opportunity to expand FFBG’s Adjusted EBITDA base by approximately 50%, partly driven by an estimated €15 million of annual run-rate synergies by 2024 through a combination of scale, operational excellence, commercial optimization, and expense management.
High-single digit percentage accretion is expected in Year 1, with 2021 combined annual adjusted EPS above $2 per share. FFBG is forecast to generate annual revenue and Adjusted EBITDA of €279 million and €53 million, respectively, in 2021.
