M&A wrap: Kellogg, Famous Amos, Keebler, Corn Flakes, Mini-Wheats, OEP, Lovell Minnick


Photo credit: Bloomberg News

In an effort to better compete and focus on core brands, Kellogg Co. (NYSE: K) is selling the company’s cookies and fruit snacks businesses, including the Keebler, Famous Amos, Mother’s, Murray and Stretch Island brands. Kellogg is known for the Kellogg’s, Corn Flakes, Frosted Flakes, Eggo, Mini-Wheats and Pop-Tarts brands. “Kellogg Company’s deploy for growth strategy, announced earlier this year, calls for the company to sharpen our focus and align our resources around our biggest opportunities to grow our top line and return to long-term sustainable growth,” says Kellogg CEO Steve Cahillane. “We need to make strategic choices about our business and these brands have had difficulty competing for resources and investments within our portfolio. Ultimately, we believe these changes will make Kellogg more agile and better focused on growing demand for our foods.” A number of consumer companies are divesting brands to focus on core businesses. Newell Brands Inc. (NYSE: NWL) recently reached deals to sell its Pure Fishing division and the Jostens brand. Campbell Soup Co. (NYSE: CPB) has hired Goldman Sachs (NYSE; GS) and Centerview Partners to divest its Campbell International and Campbell Fresh businesses, including the Arnott’s, Bolthouse Farms and Garden Fresh Gourmet brands. For more, read our full analysis: Pruning Process: 7 Consumer Goods Producers Buy & Sell to Grow.

The pressure on the retail sector has only increased in the year following Amazon’s purchase of Whole Foods in late 2017, and Sears’ recent bankruptcy filing is a cautionary tale. “Many of the challenges that retailers are currently facing are due more to a lack of innovation and investment in technology, and that they are not able to compete with Amazon,” said Alex Monahan, a consumer products senior analyst at tax and consulting firm RSM US LLP. “Investors want to see that retailers are adjusting to consumer’s changing preferences and striving to provide seamless multi-channel experiences, while also investing in technology to address the tight labor markets.” Amazon, Walmart, Ikea, Bed, Bath & Beyond and Farm Boy are among the retailers turning to M&A. For full coverage, see 5 trends driving retail M&A deals.

Deal news
Brookfield Asset Management Inc.’s private equity arm is buying Johnson Controls International plc’s (NYSE: JCI) last remaining automotive unit for $13.2 billion. Brookfield Business Partners is buying the business with partners including Caisse de Depot et Placement du Quebec. Selling the car-battery operation will enable Johnson Controls to focus on its core building-management business, reports Bloomberg News.

HollyFrontier Corp. (NYSE: HFC) is buying chemicals provider Sonneborn Holdings from One Equity Partners for $655 million. Sonneborn offers oils and waxes to the cosmetic, food, personal care and pharmaceutical sectors. Morgan Stanley and Baker McKenzie are advising Sonneborn. Goldman Sachs & Co. (NYSE: GS), Morgan Lewis & Bockius and Wachtell, Lipton, Rosen & Katz are advising HollyFrontier.

Lovell Minnick has acquired a majority stake in SRS Acquiom. The target offers technology services and data to allow potential buyers and sellers to navigate through M&A processes more efficiently. Kirkland & Ellis represented Lovell Minnick. Cowen and Co. and Latham & Watkins advised SRS.

KKR & Co. (NYSE: KKR)-backed health club operator Bay Club is buying five properties from Leisure Sports Inc. Simpson Thacher & Bartlett and Brownstein Hyatt Farber Schreck are advising Bay Club. Hanson Bridgett is advising Leisure Sports.

Visual data science company Seequent is acquiring Geosoft, a geoscience software company. Murray & Co. and DLA Piper are advising Seequent. DCF Capital Partners and Gowling WLG are advising Geosoft.

New Water Capital-backed Myotek has acquired Amptech, a manufacturer of electronics and electrical assemblies products.

Victor Media Group has bought Happy Cog, a content strategy, web design and development studio.

People moves
Jesse Hertzberg and Michael Thompson have joined Great Hill Partners as operating partners. Thompson was most recently with Nuance Communications, while Hertzberg has previously worked with Etsy, Livestream and Squarespace.

Kumber Husain was hired by DWS Group as head of private equity, Americas, where he is focusing on the execution of direct co-investment and secondary private equity transactions. Husain was most recently with Morgan Stanley Alternative Investment Partners.

Featured content
The private equity industry will focus on educating lawmakers newly elected in the mid-terms. “As an industry, we will work to educate the nearly 100 new members of Congress about private equity’s positive impact in their communities and their constituents’ lives,” Pam Hendrickson, the chief operating officer of middle-market private equity firm the Riverside Co., tells Mergers & Acquisitions in a Q&A. “We will be talking with them about jobs, investment, and retirement security. We need to make the personal case to each of the new members as well as top leadership in both the House and the Senate. As an example, the incoming chair of the Ways and Means committee Richie Neal is from the State of Massachusetts which had a 15.4 percent annualized return from its PE portfolio over 10 years.” Hendrickson is currently a member of the board of the American Investment Council and a member of the advisory board of the Kenan Institute for Ethics at Duke University. In the past, she has testified before Congress on behalf of the private equity industry. Read the full interview: Post-election priority for private equity: educating 100 new members of Congress. For more on how the mid-term election results are playing out in the middle market, including how former PE professionals Mitt Romney, Bruce Rauner and J.B. Pritzker fared Tuesday night, see Dealmaker’s post-election guide: Mitt Romney, J.B. Pritzker, Dodd-Frank, Pam Hendrickson, Gretchen Perkins.

Across the spectrum of middle-market mergers and acquisitions, there’s a great big middle ground that specialist investment banking firms handle very well. The investment banking business model works when the market itself is working. In this context, a working market means that there are multiple sellers of relatively similar “goods” — professionally run middle-market companies with continuing management teams being traded by professional investors — as well as multiple viable buyers interested in competing with each other to complete a deal. Read the full guest article written by Oaklyn Consulting’s Frank Williamson: How mid-market companies can manage crossroads situations.

U.S. middle-market dealmaking in the first three quarters of 2018 surpassed the same period in 2017, according to PitchBook. If the pace continues in the fourth quarter, middle-market deal value may surpass $400 billion for the first time ever. One important question: Will the momentum continue now that the power has shifted in Congress? Mergers & Acquisitions asked Matthew O’Loughlin, partner and co-chair of the mergers and acquisitions practice with Manatt, Phelps & Phillips LLP, to share his thoughts on how the mid-term elections will affect M&A. Read the full story: It’s been a good year for M&A. Will momentum continue post election?

Mergers & Acquisitions asked Dan Shea, a managing director at BDO Capital Advisors, to share his thoughts on the election results. Read the full story: Infrastructure investment is an area of potential agreement in Washington.

Mergers & Acquisitions asked Michael Gruber, managing partner at Salveo Capital, to share his thoughts on how the mid-term elections will affect M&A and the cannabis sector. Read the full story: Cannabis investments will likely benefit from new House leadership, Jeff Sessions’ departure.’

Mergers & Acquisitions identifies 15 cities as fertile communities for dealmaking. We look at metropolitan areas from Austin (where Michael Dell launched a PC business out of his dorm room back in the day and where thousands gather every year for SXSW) to St. Louis (home of private equity firm Thompson Street Capital Partners). Be sure to check out Milwaukee (with private equity firm Robert W. Baird & Co. and investment bank Clearly Gull) and Minneapolis (home of strategic buyers 3M, Best Buy, General Mills, Hormel and Target). And don’t forget Boston, Chicago, New York, San Franciscoand Los Angeles and more. See our list, Dealmaker’s guide to 15 cities where M&A thrives.

The New York Giants defeated the San Francisco 49ers 27-23 on Monday night to wrap up NFL Week 10. Off the field, football stars team to build companies. New England Patriots quarterback Tom Brady recently teamed with former Giants defensive end Michael Strahan, who is the co-host of ABC’s Good Morning America, to launch a sports media startup called Religion of Sports Media, which has raised $3 million in venture capital funding from CourtsideVCand Advancit Capital. Many NFL players invest in companies. Muhsin Muhammad, who played wide receiver for the Carolina Panthers and the Chicago Bears, is a managing director of private equity firm Axum Capital Partners. Steve Young, former San Francisco 49ers quarterback, is a co-founder of private equity firm HGGC. Mergers & Acquisitions takes a look at star players who invest in companies through private equity, venture capital and other investment vehicles.

Events
ACG Florida Capital Connection, held Nov. 12-14, at the Vinoy Renaissance St. Petersburg Resort & Golf Club, puts “sun and fun” into dealmaking for the middle market, bringing together hundreds of dealmakers. The keynote speaker is Forbes Media CEO Steve Forbes, and the featured speaker for the Women’s Forum is Valerie Crites Fowler, who served as a diplomat in the U.S. Foreign Service for over 29 years, reaching the rank of Minister Counselor in the Senior Foreign Service.

Middle Market Week, hosted by ACG New York and held Nov. 26-30 at various locations throughout New York, brings together leading global middle-market dealmaking professionals to develop and enhance their dealmaking activities, strengthen their long-term relationships, and provide numerous opportunities for networking all week long. Mark your calendar for the Private Equity Annual Wine Tasting Gala on Nov. 28 at Gotham Hall. The building was constructed in the 1920s as the headquarters of the Greenwich Savings Bank. The gala brings together the leading middle market private equity firms for an evening of fine wines and networking.


Demitri Diakantonis

Demitri Diakantonis

Demitri Diakantonis joined SourceMedia in 2015 and serves as Managing Editor of Mergers & Acquisitions. He covers all aspects of middle-market deamaking, with a focus on strategic buyers and the consumer and retail sectors, and writes The Buyside column.


Mary Kathleen Flynn

Mary Kathleen Flynn

Mary Kathleen Flynn joined SourceMedia in 2011, serving as the Editor-in-Chief of Mergers & Acquisitions. MK oversees the brand’s content on all media platforms, including website, e-newsletters, video, slideshows, podcasts and print.