The Private Equity News website has reported on the morning of Thursday 1st May that Tnuva Food Industries, Israel’s biggest food producer, is in advanced talks with Bright Food Group, a Chinese state owned and Shanghai headquartered food and beverage company, over the sale of a controlling stake in the business.
The website reports that Apax Partners, the London headquartered private equity firm that currently hold 51% of the shares in Tnuva, are looking to exit by selling their share, while Bright Food Group would also acquire other shares to take a total 56% controlling stake in the company.
The deal being discussed with Bright Food would give Tnuva a business value of $2.43billion, a big increase on the 2006 value when Apax took a 77% stake in partnership with Mivtach Shamir, which stood at $1.025billion. The deal is expected to be concluded quickly should talks progress smoothly, with Private Equity News’s sources stating “a matter of weeks” as being the likely timeline.
Tnuva’s specialist area is the dairy industry, and it is this characteristic that makes it such an attractive proposition, particularly to Chinese businesses. The dairy industry in China is one of the fastest growing in the world, and several companies are already looking to establish the market in the country as their own.
Global food industry business Danone have recently made significant levels of investment into the Chinese dairy industry as they look to establish their own presence there. Bright Food would immediately be able to use Tnuva’s expertise to put itself well into the dairy market in their home country.
However, Private Equity News does sound a note of caution, stating that a spokesman has said Bright Group were “understanding” Tnuva, which could easily be interpreted as “seeing whether there’s an opportunity for them to grow our business.”
It was reported in the Financial Times in February 2014 that Bright Food were actively seeking European acquisition opportunities, and executives from the company have visited many of Europe’s capital cities in the early part of 2014, meeting with food companies as well as investment banks and private equity firms who are likely to be involved in facilitating any deal.
It is believed that Bright Food and Tnuva have been in discussions of some description since mid-to-late 2013. Apax Partners are actively looking to make an exit from their investment in Tnuva, and are likely to list their shares in the business on the Israeli Stock Exchange should a deal not come to fruition.
Bright Food would not offer any comment when approached by Private Equity News regarding the deal, while Apax Partners have also been quiet on the issue. Mivtach Shamir and the Kibbutzim cooperative with retain their shares in Tnuva, and it is believed that Bright Food are unlikely to try and acquire these shares in the short-term.
Should the deal be completed, it would represent another great result for the Israeli economy, which has been the darling of the private equity world for some time, although Tnuva are the first food business to come to attention in the country.