Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
A Brazilian entrepreneur nicknamed the “Egg King” is expanding into America through a billion-dollar acquisition, at a time when prices have surged as Avian flu ravages the country’s flocks of laying hens.
Global Eggs, a privately owned holding group controlled by Ricardo Faria, said it agreed to pay $1.1bn for Hillandale Farms, one of the largest US chicken egg suppliers.
“Americans love eggs. It’s a market with high consumption,” Faria told the Financial Times. “Eggs are the fastest-growing consumer good on the shelf or in supermarket trolleys.”
Shortages blamed on bird flu outbreaks forcing culls resulted in record US egg prices earlier this year, leading government officials in Washington to look into ways of boosting imports.
However, there are signs of relief for consumers. The wholesale cost of a dozen white large shell eggs fell by one-fifth to $3.27 last week, according to the US Department of Agriculture, yet it remained well above the price of a year ago.
Faria said the purchase of Hillandale from the Bethel family was not motivated by recent market dynamics, but rather fit into an international expansion strategy.
“Eggs were once a product for low-income classes. Over the last 15 years, higher-income classes decided to get slimmer, live better and substitute foods like bread and milk for eggs at breakfast,” he added.
Based in Gettysburg, Pennsylvania, Hillandale was founded in 1958 by Orland Bethel and has run the company ever since. Gregory Cessna, vice- chair, said Hillandale agreed to the deal with Global because Faria “wants to sustain the business”.
A binding purchase agreement has been signed, with closing of the deal subject to final approvals.
Faria, 49, joined Forbes Brazil’s billionaire’s list last year with an estimated wealth of R$17.5bn ($3bn). While the Hillandale acquisition involves some debt financing, Global Eggs’ net borrowings would remain lower than 1 times earnings before interest, tax, depreciation and amortisation, he added.
The takeover will double production by businesses held by Luxembourg-based Global Eggs, giving it 2024 revenue of about $2bn and roughly $500mn of ebitda, said Faria.
Global Eggs was formed last year and operates in Brazil through Granja Faria, which was founded by the businessman in 2006 and calls itself the market leader. The group made its first overseas foray in November, paying €120mn for control of Spain’s Grupo Hevo.
The cross-border deals highlight the clout of Brazil’s agricultural sector, which is among the top producers globally of foodstuffs such as soyabeans, corn and beef.
JBS, the world’s largest meatpacker and headquartered in São Paulo, entered the egg industry in January with the purchase of a half stake in fellow Brazilian company Mantiqueira on an enterprise value of R$1.9bn.
As part of the Hillandale transaction, the private equity arm of Brazilian investment bank BTG Pactual is to inject $300mn into Global Eggs in exchange for an 11 per cent shareholding. The egg empire is also planning an initial public offering in New York.
Rabobank and BTG advised Global Eggs. Houlihan Lokey advised Hillandale.
Read the full article here
