Marel to acquire Wenger, a global leader in processing solutions for pet food, plant-based proteins, and aqua feed
27 Apr 2022 - Marel is pleased to announce an agreement to acquire Wenger Manufacturing LLC, a global leader in processing solutions focused on pet food, plant-based proteins, and aqua feed.
The acquisition of Wenger is a platform investment into new, complementary and attractive growth markets for Marel and will form the fourth business segment alongside poultry, meat and fish. The acquisition is subject to customary closing conditions such as anti-trust and approval of Wenger's shareholders.
- Platform acquisition adding a fourth business segment to Marel, in addition to poultry, meat and fish, and pro-forma, expected to contribute around 10% of Marel's total revenues and 12% of EBITDA.
- Highly complementary product portfolios and geographic presence with Wenger's industry-leading extrusion and dryer technology focused on the high growth markets of pet food, plant-based proteins and aqua feed.
- Founded in 1935, Wenger has 500 employees and revenues in 2022 are expected to be USD 190 million, EBITDA USD 32-35 million, and EBIT margin 14-15%.
- Total investment for the acquisition is USD 540 million and the transaction multiple corresponds to 14x EV/EBITDA adjusted for expected tax benefits of USD 60-70m.
- Pro-forma leverage following completion of the acquisition is estimated at around 3x net debt to EBITDA, in line with Marel's targeted capital structure of 2-3x net debt to EBITDA.
- The acquisition is fully in line with Marel's 2017-2026 growth strategy which targets 12% average annual increase in revenue through a balanced mix of organic and acquired growth.
New business segment to become a fourth pillar of the business model
A new business segment, based on the Wenger platform, will constitute Marel's fourth pillar alongside poultry, meat and fish, and will be focused on the sizeable and attractive growth markets of pet food, plant-based proteins and aqua feed. On a pro-forma basis, this new business segment will account for around 10% of Marel's total revenues and 12% of combined EBITDA.
This new growth platform is an important addition to Marel's product portfolio to meet customers' rising demand for high-quality food and feed that is processed in a sustainable and affordable way.
The two companies have a great strategic and cultural fit with highly complementary product portfolios and geographic presence, creating a strong platform to enhance further growth. Wenger shares Marel's passion for innovation and commitment to best-in-class products, backed by an experienced team and long-standing partnerships with customers. Wenger enjoys a diversified and loyal customer base ranging from blue-chip pet food processors to startup companies in plant-based proteins. This has resulted in healthy profitability, strong cash flow and solid return on invested capital. Capitalizing on Marel's global reach and digital platform, the two companies are well positioned to explore future growth opportunities together.
Growth platform into new and attractive growth markets
The global petfood and aqua feed markets are estimated at over EUR 100 billion and EUR 50 billion respectively and growing at 5-6% annually. The plant-based protein market is currently around EUR 7 billion and expected to grow 15-20% annually.
The addressable market for Marel and Wenger in solutions and services within pet food, plant-based proteins and aqua feed is estimated to be around EUR 2 billion with expected annual growth of 4-6%, in line with Marel's long-term market growth expectations. Marel aims to grow faster than the market, based on its continuous innovation and global reach.
Throughout the years, Marel has gradually expanded its playing field and is now the only pure-play provider of full-line solutions, software, and services to the poultry, meat, and fish industries. In the vision solidified in 2016, the scope was widened from the three animal proteins to focus more generally on transforming food processing. In 2020, Marel announced an increased focus on adjacent markets and in 2021 it formally established a business development division focused on pet food and plant-based proteins. Adding Wenger's strong capabilities in that area, Marel is accelerating its journey and is well positioned to capitalize on providing transformational solutions to the large and attractive growth markets of pet food, plant-based proteins, and aqua feed.
Marel sees great opportunities and is committed to invest in the combined business to accelerate growth. The acquisition is expected to be margin and earnings enhancing. Planned initiatives include expanding manufacturing capacity to respond to high demand in Wenger's core markets. Aftermarket revenues represent over 40% of Wenger's revenues, and Marel's global reach and digital platform will support a more proactive aftermarket approach to better service customers around the world.
Transaction highlights and timeline
Marel has agreed to acquire Wenger Manufacturing LLC., including all relevant business activities of the group. The total investment for the acquisition is USD 540 million. Thereof, USD 530 million is the purchase price on a cash and debt-free basis (enterprise value). The remaining USD 10 million is a combination of a contribution to a not-for-profit private foundation, to continue the legacy of Wenger and its meaningful impact on the community, as well as Marel shares for Wenger employees.
The purchase price will be paid with cash at hand and existing credit facilities. Discussion with selling shareholders regarding partial consideration in Marel shares is ongoing and will be concluded prior to closing. The transaction will also result in expected tax benefits of USD 60-70 million and the adjusted transaction multiple corresponds to around 14x EV/EBITDA.
The acquisition will be financed through Marel's strong balance sheet and existing credit facilities. To preserve operational headroom, Marel has signed a EUR 150 million bridge facility from BNP Paribas Fortis SA/NV. Assuming a full cash payment, pro-forma leverage following completion of the acquisition is estimated to be around 3x net debt/EBITDA, compared to Marel's targeted capital structure of 2-3x net debt/EBITDA.
The closing of the acquisition is subject to customary closing conditions, including anti-trust and shareholder approval of Wenger, which is expected to take place during Q2 2022.
Arni Oddur Thordarson, CEO of Marel, commented:
'We are thrilled to join forces with the great team in Wenger with whom we have a strong strategic and cultural fit. Wenger's passion for innovation and commitment to high-quality solutions, in addition to their excellent customer focus and talent management, are the key attributes Marel is proud to partner with. Wenger is a true leader in its field of providing solutions and services to the pet food industry and aqua feed industries, and has in recent years made its mark on the fast-growing plant-based protein consumer market with best-in-class solutions positioned right in the center point of the value chain.
The Wenger acquisition is in line with our vison of a world where food is produced sustainably and affordably. Throughout the years, Marel has gradually expanded its playing field. This platform acquisition will add the fourth business segment to our business model, in addition to the poultry, meat and fish segments, where we are a global leader in processing solutions, services and software. On a proforma basis, the new segment will account for around 10% of revenues and 12% of combined EBITDA. We see immediate opportunities for growth and value creation by leveraging Marel's global reach and digital platforms in Wenger's sizable addressable markets. The two companies have complementary technologies and a product portfolio that will accelerate the journey to become full-line providers in the respective fields.
Marel has a strong financial position to pursue future growth avenues and a proven track record in driving long-term value creation. I am confident Marel will be a good steward for the Wenger business, its talented team and continued local community engagement, and we remain committed to our continued future success.'
Trevor Angell, Chairman of the Board of Directors of Wenger, commented:
'Wenger has a long history as an innovative, responsive partner to our customers. The relationships we have built, and the incredible character of our people are central to this. Our long-standing customers worldwide are looking for a trusted partner and local support to keep their operations running at optimal performance. Marel has invested significantly in its global reach and digital platform, which will improve Wenger's ability to be the partner of choice for our clients throughout the long life-cycle of our equipment. Further, our dedicated team will be joining a large, healthy, international organization where they can grow and see increased opportunities.
During our interaction, it was apparent that there is great strategic and cultural alignment between Wenger and Marel. Our shared values and vision, our care for customers and employees, and the combined technical strengths of the two companies will create tremendous value in global food production. We are pleased to be joining forces with Marel, and we are excited for the opportunities our friends and teammates will experience.'