Marel adds a fourth pillar to its business model
Marel reached 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.
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 €100 billion and €50 billion respectively and growing at 5-6% annually. The plant-based protein market is currently around €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 €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 $540 million. Thereof, $530 million is the purchase price on a cash and debt-free basis (enterprise value). The remaining $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 $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 €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.
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