Kellogg is Challenging Abraaj Investment Management Over Bisco Misr


December 1, 2014

The global business scene is used to heated competition and bidding wars over mergers and acquisitions is an everyday reality. One of the most heated competitions currently going on is the bidding war over Egyptian cake and biscuit maker Bisco Misr, with the US food giant Kellogg competing against the UAE-based private equity firm Abraaj Investment Management.


Abraaj Nearly Sealed the Deal
The competition has been going on for weeks now, with Abraaj’s bid initially approved in mid-November. At the time, the company was reported to have won the regulatory clearance with an offer worth $118 million over the Egyptian company.


Furthermore, Saudi Gazette reported that the Middle East’s largest private equity firm had won the approval of 56% of Bisco Misr’s shareholders. The firm was hoping to seal the deal in the early weeks of December.


Kellogg Forces Abraaj to Raise the Initial Offer
But on the final week of November, newspapers reported Abraaj had to raise its initial offer to counter a rival offer from Kellogg. Abraaj’s new offer would have seen the firm pay $11.27 per share, which was 2% higher to Kellogg’s offer. The new offer therefore stood at $129.6 million.


Both companies are strictly looking at purchasing Bisco Misr, with both aiming for at least a 51% controlling stake of the company.


The Bidding Wars Continue
Yet on Sunday, Reuters reported that Kellogg has once again countered Abraaj’s offer for the cake and biscuit maker. The world’s largest breakfast cereal company raised its bid to $11.50 per share. This means that the offer price is now 12% higher than the initial offer by Abraaj.


Abraaj had not yet responded with a counter-offer, but it is expected the private equity firm isn’t looking to give up its fight. The firm, which has around $7.5 billion of assets under management, has typically been keen to invest in emerging markets and Bisco Misr fits the firm’s investment strategy well.


Lure of Bisco Misr
Both companies are keen to invest in the Egyptian company. Bloomberg reported the company made “a profit of 5.5 million Egyptian pounds ($769,000) in the second quarter” this year. Bisco Misr has three main facilities in Egypt, with two of them located in Alexandria and one in Cairo.


Allen Sandeep, a research director at Naeem Brokerage told Bloomberg earlier this year that there are strong reasons for companies to be interested in Bisco Misr. “With a market that has a population of 90 million, you look at any sub-segments within the consumer and food sectors and there is massive potential,” he said.


Trend of Investing in Consumption Markets
Food producers are currently the focus of many private equity deals, as the consumption market is growing in size. It is especially lucrative in many emerging markets as the markets are growing increasingly fast and the growing middle-classes are able to spend more money.


KKR has been investing heavily on the Chinese food industry and last week Tech Crunch reports showed how a Korean food app was able to fundraise nearly $36 million in an investment round led by Goldman Sachs.


It remains to be seen how far are both Kellogg and Abraaj willing to go in the bidding war over Bisco Misr.

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