Private equity firm Advent International is buying Indian snacks maker DFM Foods Ltd (manufacturer of Crax branded snacks) in a deal that will see existing investor WestBridge Capital exiting the company.
Advent has agreed to acquire almost 68% of DFM Foods from promoters and WestBridge for Rs 851.67 crore ($118.8 million) and has made an open offer to buy up to 26 per cent from the company's public shareholders, the Indian company said in a stock-exchange filing.
Advent is making the open offer at Rs 249.50 per share. That's 7.66% discount to the company's closing share price of Rs 270.20 on the BSE on Monday. The open offer will cost Advent Rs 326.11 crore. The PE firm will spend around Rs 1,178 crore (about $164 million) to own 94 per cent in Delhi-based DFM Foods.
WestBridge had first invested in DFM in 2014 and owns a 24.8 per cent stake. In September last year, VCCircle had reported that DFM was planning to raise capital via a share sale to scout for acquisitions.
For Advent, this is the second India deal in less than a week. Last week, the PE firm agreed to invest Rs 1,000 crore in non-bank lender Aditya Birla Capital Ltd along with Premji Invest.
Excluding these two deals, Advent has invested nearly $1 billion in India since 2007.
The transaction, Advent’s seventh investment in India in the past four years, is subject to customary closing conditions and is expected to be completed in three to four months. Following the completion of the open offer, DFM will remain publicly listed company.
DFM is a pioneer in the Indian snack food market. Since introducing its flagship brand, “CRAX” corn rings, in 1984, the Company has expanded its portfolio to more than 15 products. Today, it markets corn rings, corn puffs, wheat puffs and crispy sticks under the “CRAX,” “CURLS,” “NATKHAT” and “FRITTS” brand names, respectively. It also offers a range of traditional “namkeens,” or savory snack foods, including bhujiyas, daals, mixtures and nut mixes, in a variety of pack sizes.
With manufacturing facilities in Ghaziabad and Greater Noida, DFM sells its products through an extensive distribution network spanning the entire country. Over the last 10 years, the Company’s sales and EBITDA have grown at a compound annual rate of 21% and 24%, respectively, making it one of the fastest-growing companies in its category.
“DFM is a leader and innovator in a large, fast-growing segment of the Indian food and beverage industry,” said Shweta Jalan, a Managing Director and Head of India at Advent International. “The Company has strong brand awareness and distribution and numerous opportunities for continued growth. We are excited to partner with DFM to help drive its next phase of expansion.”
“Over the past 35 years, we have established a position as one of India’s leading snack food providers, bringing excitement to people’s lives through our innovative, high-quality snacks and brands,” said Mohit Jain, Chairman and Managing Director of DFM Foods. “We appreciate the support we have received from WestBridge Capital in expanding the company over the past five years and welcome Advent International as DFM’s new majority shareholder to help drive continued growth and consolidate the business in the future.”
“The food and beverage market in India is a fragmented, regional industry, and we look forward to working with DFM to build a larger and broader food and beverage business through further organic growth and targeted M&A,” said Sahil Dalal, a Director at Advent in Mumbai.
Sandeep Singhal, Co-founder and Managing Director of WestBridge Capital, said, “The Founders at DFM have created a company known for its quality products, loved brands and robust distribution. It has been a wonderful journey to see the business grow from strength to strength over the last five years. We wish the Founders, Company and Advent the best of luck for the future.”
Advent Operating Partners V.L. Rajesh and Manu Anand helped Advent to evaluate the investment opportunity and will continue to advise Advent and DFM on the development and execution of the value creation plan for the business going forward. Mr. Rajesh is the former CEO and COO of ITC Foods, the No. 3 food business in India, and played a critical role in building brands such as Aashirvaad, Bingo!, Sunfeast, YiPPee! and Candyman. Mr. Anand was most recently President of the Chocolate Business at Mondelez International in Asia, the Middle East and Africa. Prior to that, he was Chairman and CEO of PepsiCo India and is widely credited with building PepsiCo’s snack food business in India.
Advent International has been investing in India since 2007 and opened its Mumbai office in 2009. Over the past 12 years, the firm has deployed more than $1 billion in nine companies with headquarters or operations in India across sectors such as consumer products, financial services, healthcare, industrial and technology. Recent investments include Aditya Birla Capital, the holding company of the financial services businesses of Aditya Birla Group; Manjushree Technopack, India’s largest provider of rigid plastic packaging solutions; Dixcy Textiles, a leading innerwear brand; ASK Group, a leading wealth and investment management business; QuEST, a global engineering solutions provider; and Crompton Greaves Consumer Electricals, India’s leading supplier of consumer electrical goods and lighting.
Advent also has significant investment experience in the retail, consumer and leisure sector. In the past 29 years, the firm has invested more than $11 billion in over 75 companies in the sector worldwide. ICICI Securities Limited is serving as financial advisor to Advent International and is managing the open offer. KPMG is acting as exclusive financial advisor to DFM Foods.