Fully leveraged acquisition of Vitamat, the largest breakfast cereal brand in Britain, shows that after several twists and turns, the internationalization of Bright Food has started smoothly.

00 London time165438+1October 2, Bright Food Group completed the acquisition and delivery of British Vitamax Food Company, and acquired 60% equity of the latter for 65438+800 million pounds in cash. Bright Food also helped Vitamat replace 900 million pounds of debt.

00 Bright Food kept a low profile in the whole acquisition process, reducing external interference, and signed an exclusive agreement with Vitamax at the beginning of the acquisition. To this end, Bright Food has adopted various financing methods, including signing short-term loan agreements with banks such as Bridge Loan.

Kang Yan, global senior partner of roland berger Management Consulting (Shanghai) Co., Ltd. said: "Although the short-term cost of bridge loan is high, it is very important and valuable for signing an exclusive agreement and even completing the acquisition."

Giles Turrell, the middle-sized and gray-haired CEO of Vitamax, told Caijing that Vitamax's entry into China has a vast market, and it is a strategic win-win transaction for both parties to integrate upstream resources and share its channels.

00 bright food has successfully acquired Synlait Milk Ltd in new Zealand in recent years, after abandoning the conspicuous food and beverage industry acquisitions such as United biscuits and Uno in France. ) and Australia's Manassen Foods, and successively set a record for the acquisition amount of the food industry.

For bright food determined to internationalize, after several twists and turns, the road to internationalization began to go smoothly.

00 to do due diligence.

00, the acquisition dates back to the end of 20 1 1.

00 international investment bank introduced that Bright Food found Lion Capital on 20111to negotiate the acquisition of Vitamax, the largest cereal food producer in the UK. At that time, Lion King Capital held 0/00% shares in Vitamax/Kloc. Vitamax, with a history of 80 years, was a family business before 2003. Due to operational difficulties, it was acquired by London-based Lion King Capital for 642 million pounds in 2003 10. In the following eight years, Vitamax's sales and profits improved, and dividends were paid one after another.

00 financial report shows that before Lion King Capital entered the company, Vitamax's gross profit never exceeded 85 million pounds, but from 2007 to 20 1 1, Vitamax's gross profit exceeded 1 billion pounds. 20 1 1 year, Vitamat realized gross profit 1.29 million pounds and net profit of 8 1.74 million pounds.

00 lion king capital, which has obtained full investment return, wants to quit 20 1 1. After rejecting some willing funds, it chose Bright Food, a food giant from China. "The Lion King will help Vitamat get out of the predicament and achieve stable profits. However, to bring the next 80 years of prosperity to Vitalmai is not something that fund companies can do, and an industry coordinator is needed. "

In Bright Food's view, the acquisition of Vitamax will expand Bright Food's overseas market share and overseas distribution network, improve its profitability, and look forward to the further growth potential after Vitamax is introduced into China. Lion King Capital gave up many funds that it wanted to take over and chose industrial companies, which showed its strategic vision and attention to the reputation of the fund industry.

00 "They don't just play with money, but hope to strategically design a long-term development path for Vitamax. Lion King Capital and Bright Food are very compatible in strategic vision and strategic concept. We also very much hope that Lion King Capital can continue to participate in the management of Vitamax as a minority shareholder. " A core member of the bright food negotiation team told Caijing reporter.

00 as a 40% minority shareholder continues to hold Vitamax, leaving some management team, which is the affirmation of Bright Food to Lion King Capital, which wanted to withdraw completely. Lion King Capital will enter the process of repayment of principal and interest on 20 14. By then, Bright Food will be able to directly take over the remaining 40% shares of Vitamax, or prepare to IPO Vitamax with Lion King Capital in Hong Kong.

00 for Lion King Capital, this is also an acceptable business. Vitamat is facing a critical moment to promote cereal food all over the world. The British grain market dominated by Vitamax has become saturated, and China replaced the United States as the largest grocery market in the world at 20 1 1. The booming China market is in sharp contrast to the stagnant British market.

The distribution channel of Bright Food in China is the inevitable choice for Vitamat to enter China on a large scale. Lyndon Lea, a partner of Lion King Capital, is optimistic about the cooperation with Bright Food, and thinks that Lion King Capital not only gets 60% cash replacement, but also has access to the ready-made distribution network in China.

00 strategic hit it off does not mean that the two sides will make any concessions in specific negotiations. Bright Food and its professional team have done more in-depth due diligence on Vitamax than ordinary state-owned enterprises, which is illustrated by the dispute between the two sides on pension issues.

00 pension problem is a common problem faced by many old British enterprises. According to British law, in the past, the old employees in Britain did not give the old-age insurance to the state like the new employees now, and then paid the pension through the social security system, but gave the money to the enterprise to form a pool of funds. As a trustee, social intermediary is responsible for the investment management of this pension, such as buying government bonds and investing in stocks and real estate according to a certain proportion. Do an actuarial study every three years to see if there is enough money in the fund pool to support those retirees. If there is a gap, the enterprise needs to make up for it with operating profit.

With the advent of the financial crisis and the European debt crisis, the British national debt continues to be depressed, and whether there is a huge gap in corporate pensions is a point of contention between the two sides. According to international accounting standards, Lion King Capital calculated Bright Food, showing that Vitamet's pension has a surplus of 65.438+08 billion pounds, but Deloitte's calculation results for Bright Food show that there is a funding gap of more than 65.438+05 billion pounds.

00 years ago, Bright Food withdrew from the acquisition of United Biscuits because the pension problem could not be settled. In this negotiation, Cao Xiaofeng, the financial director of Bright Food, made it clear: "Lion King Capital wants to withdraw from Vitamax, but this gap is caused by their operation of Vitamax, so Lion King Capital must compensate Bright Food for the pension in one lump sum."

00, the two sides repeatedly argued on this issue, which once became an important factor in the stagnation of negotiations. Since 50% of the pension was invested in government bonds, the two sides finally decided that Lion King Capital would take out 30 million pounds to make up for Bright Food according to the interest rate of British government bonds at that time. "At that time, the interest rate of British government bonds was already at a very low stage and it was likely to rebound. Moreover, the gap of 65.438+0.5 billion pounds cannot be filled in one year. It is more reasonable for us to calculate. " Cao Xiaofeng said.

00 Vitamax's high debt is also one of the focuses of this acquisition. The asset value of 65.438+0.2 billion pounds, the debt of 900 million pounds and the debt ratio of 75% make many observers have a low evaluation of Vitamax. However, Kang Yan told Caijing that "this is precisely the highlight of this acquisition". Vitamax's high debt is not due to poor management, but the original shareholder Lion King Capital deliberately did it, and its purpose may be to avoid taxes.

According to the company's financial data, 400 million of its 900 million liabilities are "shareholder loans" with a loan interest rate as high as 9%. "Logically speaking, in the context of the general economic depression in Europe, even if Vitamat needs financing, it can easily get a loan interest rate of 2% to 4%." Kang Yan said.

Kang Yan believes that the reason why Lion King Capital gave Vitamax a loan interest rate as high as 9% is probably to depress the company's profits through such financial means, thus avoiding the high tax rate in the UK. "This is a common financial method to transfer profits."

00 Vitamax's high debt will not change the acquisition prospect of Bright Food, but may become a powerful economic growth point for Vitamax in the future. After the acquisition, Bright Food will reduce the loan interest rate of 400 million pounds to the market level through the bond swap of the Bank. Bright Food can get a bank loan interest rate of 2% to 4% from the Hong Kong financial market. Based on this calculation, it can earn 24 million pounds a year.

00 bright food 20 1 1 operating income 76.9 billion yuan, net profit 2.65 billion yuan. It is generally believed in the industry that Bright Food's own funds are not sufficient.

In order to complete the acquisition, Bright Food launched a series of financing activities, and finally completed the acquisition with high leverage. First, raise funds through one-year bridge loan to complete the delivery, and then find a suitable time window to issue bonds overseas. In Bright Food's view, such financing behavior has the lowest cost and the most flexibility.

Bright Food has opened up a situation in the domestic bond market, and the medium-term notes issued many times have sold well. However, when going to international bond markets for the first time, the first thing to face is the ratings of the three major international rating agencies.

002065438+In September, 2002, it released the main rating of Bright Food with Standard & Poor's, and all three rating agencies made an "investment grade" evaluation of Bright Food. Standard & Poor's believes that Bright Food is in good operating condition, has large-scale sales and distribution channels in China, and its overseas expansion is on the right track, all of which have hedged its inherent operating risks.

Standard & Poor's pointed out that although Bright Food has high financial leverage and weak cash flow, due to its relationship with the Shanghai Municipal Government, Bright Food has a very spacious financing channel in the domestic capital market, and the possibility of the Shanghai Municipal Government providing adequate and timely special support in the face of financial difficulties is "high".

00 bridge loan, in which Bright Food raised US$ 850 million in Hong Kong, and participated in Chinese-funded CDB, Bank of China (2.74, 0.00, 0.00%), Bank of Communications (4.22, 0.0 1, 0.24%) and foreign-funded Royal Bank of Scotland, Barclays, HSBC and ANZ. Bright Food was delivered in bridge loan on 1 1.2, and will look for a suitable window to issue bonds overseas in the coming year.

If there is a good price, it may be completed in a month or two. If there is no price, it may take ten months, because the interest rate and exchange rate are difficult to control. We find the most professional banks to serve us and tell us information about risks and trends every day. " Cao Xiaofeng told Caijing reporter.

Under the current economic situation, the loan interest rates in Europe and America are generally maintained at 1% or even lower. Kang Yan said that Bright Food effectively reduced the financing cost through bidding. According to the judgment of Bright Food executives, this fully leveraged financing makes the financing cost of overseas mergers and acquisitions the lowest, saving about 3%-3.2%.

00 Vitamax China Plan

00Vitamat has been sticking to the British market for a long time and is the largest breakfast cereal brand in Britain, accounting for about 14.5% of the British market share. Two years ago, Vitamax's brand was sold in supermarkets in China's first tier cities through Sinodis, which specializes in importing food, such as supermarkets in Shanghai and Yaohan, focusing on high-end food. But the sales only reached 6 million yuan.

00, which made Vitamax's top management very dissatisfied. Giles Turrell, CEO, told Caijing that "the sales volume in China did not meet Vitamax's expectations, and dealers mainly promoted in first-tier cities such as Beishangguang, and the channels were mainly retailers." According to Nielsen, a consumer goods market research organization, the annual sales of breakfast cereals in China reached 2.6 billion yuan in recent years, with the growth rate of 10%-20% in recent years. Consumption is mainly concentrated in the more developed provinces in the east and south, and the market contribution exceeds 65%.

00 10, 17, Vitamax executives arrived in Shanghai to discuss the sales plan of Bright Food in China. Giles Turrell did not disclose more details about China's sales plan. He told Caijing reporter: "The cooperation with Bright Food can bring our products to China, and the huge distribution channel of Bright Food in the Yangtze River Delta with strong consumption power is what we value most." The reporter learned that the two sides are quite optimistic about the sales prospects of Bright Food after replacing Sinodis.

Vitasoy is facing a huge potential market in China. However, if it wants to win the China market, it still needs to rely on brand building, consumer training, marketing and product innovation.

Take the breakfast cereal market as an example. For China people who like to eat rice porridge or fried dough sticks for breakfast, it is necessary to cultivate the habit of eating mushy grains soaked in cold milk. Giles Turrell admits that there is still a long way to go to turn the scale advantage of China market into real sales. The first step is to get familiar with consumers' habits, and the second step is brand.

00Turrell thinks that the cereal breakfast market in China is still in its infancy, and Vitamat should do a lot of consumer market research after coming in to get familiar with their tastes. Then promote the relatively unfamiliar cereal breakfast to them through targeted marketing means, and finally use Vitamax's global brand and healthy image to realize brand solidification. In short, it is to make a big cake first, and then differentiate competition.

After monitoring the breakfast cereal market in China for many years, Nielsen found that imported brands of breakfast cereal have no absolute advantage in market share performance, and the overall share accounts for about 30%; On the contrary, in the current breakfast cereal market in China, local brands do not have too many brand disadvantages.

Although the China market has not been fully developed, there are also many pioneers.

Zhou Lingqing, deputy director of retail research services in China, 00 Nielsen, said: "Take Seamild, a local brand with a leading share, as an example, whose product packaging clearly highlights its grain raw material, Australian golden oats, and its advantages in distributing goods after ten years' hard work in China market, and consumers' recognition of the brand is still very high. "

Quaker, a subsidiary of PepsiCo Foods, is a relatively mature international brand, with a growth rate of around 30% in the last two or three years. Its advantages mainly lie in innovation and marketing. In 20 12, new flavors (red dates and purple potatoes) which are in line with the habits of consumers in China were introduced, and oatmeal products introduced in 20 1 1 year all received good market response. At the same time, Quaker has brought into play the advantages of international brand Pepsi food in integrating market and channel resources.

Another famous cereal breakfast manufacturer is Kellogg Company in America. In the past, similar to Vitamat, it entered the China market in the form of original import, and recently announced its investment plan for the China market, including the establishment of a joint venture company.

00 Vitamax obviously has its own advantages and attempts.

00, 1932, the largest breakfast cereal brand founded in the UK, has an excellent product portfolio, including Weetabix, a well-known British cereal brand, and two best-selling cereal bars Alpen and ReadyBrew in the UK. A number of senior executives of Bright Food and Vitamat told reporters that Vitamat can greatly increase its sales volume and influence in China with the help of broader network channels such as First Food, Agriculture, Industry and Commerce Supermarket under Bright Food, compared with the relatively high-end urban retail supermarkets before.

Cao Xiaofeng said that consumers think Vitasoy brand is synonymous with "health". "This is also an important reason for us to buy it. Our country will guide high-fiber and low-fat foods in the next few years. "

00Giles Turrell also revealed that if we bring the product to China, we will definitely make appropriate adjustments and do research and development on the taste. "We don't expect to change China's breakfast habits in the short term, but we will improve them according to the taste and lifestyle of China people."

00 bright road to internationalization

From 2008 to 20 10, Bright Food's overseas acquisitions, from South Locomotive Australia, United Biscuits UK, GNC USA to Uno France, failed four times.

Ge, as the vice president of Bright Food and the chairman of Shanghai Tobacco Sugar Industry, is responsible for the whole negotiation with Australian CSR project. He recalled, "At that time, our quotation was $65.438+$75 million. Later, after due diligence, it was found that the company was not worth $65.438+75 million. We are a state-owned enterprise. If the risk is difficult to control, we will give up. "

00, forced to give up because of the hole in the British pension. Deloitte helped Bright Food find the problem when doing due diligence.

Ding Jianping, a partner of Deloitte M&A, told Caijing: "European pensions invest in securities products, so the market value of pension assets is uncertain. China enterprises lack experience and often do not consider this factor in advance. "

As the director and chief financial officer of Bright Food, Cao Xiaofeng first came into contact with the British pension legal system. He recalled to Caijing that the British pension system stipulates that once there is a gap in pension investment, enterprises must increase their investment, which may affect cash flow.

00 "We finally talked about the problem of finding a pension, and the gap in this problem is relatively large. We asked for a compensation mechanism when the fund withdrew, but no agreement was reached on this issue. This is also the lesson that United Biscuits taught me, that is, how to deal with the pension gap is very important. "

When Uno was acquired, Bright Food was in the ascendant. Chairman Wang Zongnan also personally visited the French Ministry of Finance and tried his best to communicate with the government and the public. But in the end, it was killed by GM (General Mills), bought 50% equity of UNO in France, and had absolute control over the company's operation.

Cao Xiaofeng told Caijing reporter that the reasons are quite complicated. Bright Food must communicate with the media, farmers' associations, parliamentarians and the government in an all-round way to explain the intention and benefits of purchasing Bright Food.

Through these overseas practices, Bright Food has gradually explored several acquisition conditions: whether the price is reasonable, whether the risk is controllable, whether the team can integrate, and whether it can cooperate with Bright Food products. "If these conditions are not met, we will give up."

Cao Xiaofeng said that it is a misunderstanding that many people think that state-owned enterprises can make acquisitions at no cost if they go out to negotiate. In the merger and acquisition principle of Bright Food, if the risk is uncontrollable, quitting is also a victory, so don't carry the risk burden on your body. In the case of United Biscuits, Bright Food did just that; The other party didn't want to lose a good strategic investor in this Vitamax negotiation, so after several rounds of negotiations, Lion King Capital finally compromised on the pension issue.

After these setbacks, Jie Jun and Cao Xiaofeng of GE have a deeper understanding of internationalization. Among them, there is an understanding of the financial and legal aspects of western countries. "Through these projects, we have learned a lot, such as the financing mode and financing structure of each country." Ge Jiejun said.

00 In the two successful acquisitions of Vitamat and Manason, Bright Food was bought from two private equity funds, Lion King Capital in Britain and CHAMP in Australia. This shows that bright food has begun to use external resources with the help of external forces.

Wang Zongnan, chairman of 00, gave a very good evaluation of private equity funds. "In the whole acquisition process, I feel that the role of PE is still very obvious. Because of their high degree of internationalization, the analysis and judgment of some industries, including some professionals, are also concentrated. "

In the past two years, Bright Food has completed four overseas mergers and acquisitions. In addition to the acquisition of 60% equity of British Vitamax, the other three actions are: acquisition of 50% equity of New Zealand Synlait Dairy in July 20 10/0, acquisition of 75% equity of Australian Manassen Food in August 2010, and acquisition in August 20 18.

It can be seen that Bright Food has made overseas acquisitions around the food manufacturing and distribution network of sugar and liquor dairy industry.

In many media interviews and public occasions, Chairman Wang Zongnan said that Bright Food's overseas mergers and acquisitions "have just started". Bright Food needs to build a whole industrial chain enterprise through mergers and acquisitions, extending from food manufacturing to raw material base and terminal.

Ge Jiejun believes that although China has a huge market with a population of 654.38+0.3 billion, there are few food enterprises that can participate in international competition. Therefore, "you need to cooperate with international excellent enterprises through mergers and acquisitions to form synergistic benefits."

On many occasions, Wang Zongnan emphasized the merger idea of Bright Food: following the merger principle of "conforming to strategy, having synergistic effect, reasonable price and controllable risk". Successful acquisition is not limited to the completion of project negotiation and delivery, but the success of coordination, docking and integration after signing the contract.

In terms of M&A, Kraft, the second largest food company in the world, also follows the development strategy of M&A. In the past ten years, Kraft has been actively engaged in global distribution, expanding new markets and new products through mergers and acquisitions. 20 10 became the largest candy industry in the world through the acquisition of Cadbury, and used Cadbury's powerful distribution channels to sell its products to emerging markets such as India and Brazil.

Zhang Yichen, president of CITIC Capital, said in an interview with Caijing that Bright Food made overseas acquisitions because it was a strategic investor and attached importance to the integration with existing businesses. "But we all have different views on how far this combination can go and whether it can release synergistic benefits."

00 For example, through the acquisition of Australia's Manason Food Company, Bright Food believes that it can inherit more than 700 access terminals in Australia, Europe and North America1/kloc-0. At the same time, Manason is the agent of many Australian brands, and can extend the agency rights of these brands from Australia to China. In addition, with the help of Manason's platform, Bright Food plans to bring yellow wine, white wine, China health products and other products into the Australian market.

In this regard, Ding Jianping, a partner of Deloitte M&A, pointed out that the integration planning after M&A should be considered before M&A was put forward, which was not valued by China enterprises in the past. Further changes in Bright Food may start here.