M&A: Piecing Together a Natural-Foods Empire

Piecing Together a UK “Powerhouse”
In the fall of 2011, after five years in the UK, Irwin Simon was struggling to turn his pieced-together collection of better-for-you UK brands into a consistently profitable whole. Always alert to potential acquisitions, Simon was hot on a Leeds company, the Daniels Group, a heavily leveraged food company coming off a $280 million sales year. Simon liked Daniels’ management,
systems and potential to serve as a growth platform. In October he bought Daniels for $230 million cash, tapping Hains’ credit line. The deal had synergy written all over it, in Simon’s handwriting. Back in the U.S., in a rare moment of bravado, the U.S. dealmaker boasted to an audience of analysts that his latest acquisition would become a UK natural foods “powerhouse.”

Daniels had bounced around under several Asian owners taking on growing debt the past decade. Simon took on Daniels’ debt along with its top brands: New Convent Garden Soup, UK’s
top-selling fresh chilled soup brand; the Johnson’s Juice, a popular fresh line of juices, puddings and smoothies; and Farmhouse Fare, a dessert favorite. These were well-known brands in a
vibrant market. Fresh and chilled products then accounted for half of UK food sales; the segment continues to grow.

“Under 7x EBITDA, is Simon’s deal-making sweet spot.”

Simon wasted no time filling his new channels with products from earlier UK acquisitions, including Linda McCartney’s chilled meat-free meals. He added a barrage of U.S. brands acquired piecemeal over the past 15 years including Celestial Seasonings teas, Earth’s Best organic baby foods, Rice Dream dairy-free drinks and Terra Chips vegetable snacks. Rob Burnett, Daniels’ leader, stayed on as CEO of Hain Celestial United Kingdom and set to work implementing a series of consolidations that optimized purchasing, procurement, manufacturing, warehousing and distribution processes. Next they culled several underperformers, discontinuing sandwich making and chilled-soup lines. The efficiencies and asset sales paid for the deal.

Less than a year later, Simon closed on an even bigger UK deal. In August 2012, he shelled out $318 million in cash and shares for a heavily leveraged Premier Foods. Simon paid under 7x
EBITDA, the cap he disclosed in June as his deal-making sweet spot. The acquisition brought such brands as Hartley’s and Robertson’s jams, Sun-Pat peanut butter, Gale’s honey and Frank Cooper’s marmalades into the fold, establishing Hain Celestial in the top 40 of all UK food and beverage suppliers. Hain also acquired Premier’s manufacturing plant in Histon, England.

Simon has continued shopping in the UK, adding each new acquisition to the Daniels platform. In 2013 he absorbed Ella’s Kitchen’s organic baby foods, a $70 million sales company he acquired
for an undisclosed price. Last year, he purchased Tilda, a branded basmati and specialty rice company, for $358 million.

He’s integrated his roll-ups into the powerhouse he promised in 2011. In Q2 2015, net sales in the UK soared 38 percent to $201 million, overshadowing 8 percent U.S. growth on revenues of $354 million. The future? “The company’s performance remains impressive, marked by record sales, efficient expense management and focus on productivity enhancement, which lead to profitable global expansion,” wrote Zacks Equity Research in August. “Hain Celestial is likely to sustain its strong momentum and appears favorably positioned to capitalize on the growing global demand for organic products.”