PE firms miss out as Vion sold to Darling

December 2013 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

In October it was announced that Darling International Inc had agreed to acquire the outstanding shares of Vion Ingredients for around $2.2bn. The acquisition of Vion by Darling comes as a blow to a number of private equity firms which had also been keen to complete a deal for the company.

According to a joint statement released by the companies, the deal is expected to be completed in January 2014 subject to the usual regulatory approvals. Darling also noted in the statement that it intends to pay for the deal in cash. The company will be financing the transaction through a combination of bank debt, public debt and equity, and was advised by JP Morgan. Goldman Sachs, JP Morgan and BMO Capital Markets all agreed to provide financing to support the deal.

US based food business Darling won a particularly competitive auction to acquire the Vion business after the unit’s Dutch owners agricultural and horticultural association ZLTO put the company up for sale earlier this year. A number of firms including Advent International, CVC, Apax, BC Partners, Bain Capital, KKR, Blackstone and Cinven were all believed to have been interested in acquiring the subsidiary.

The deal for Vion is Darling’s largest acquisition to date. Shares in Darling closed up 2.3 percent on 7 October, the day the deal was announced. The company’s shares have performed well in 2013, rising 30 percent throughout the year. As a result of these gains, Darling has a market capitalisation of around $2.5bn.

Vion Ingredients, headquartered in the Netherlands, employs around 6000 staff and produces gelatine, proteins and fats from slaughterhouse by-products which are then sold to the pharmaceutical, cosmetics, food, feed, energy and technology sectors. The firm consists of a global network of 58 facilities that cover all aspects of animal by-product processing.

In April ZLTO hired Bank of America Merrill Lynch to provide advice on the sale of the division. The original target price for Vion is believed to have been in the region of €1.4bn to €2bn. Speaking about the deal for Vion, Randall Stuewe, Darling’s chairman and chief executive, said “Our vision of creating a sustainable ingredients business for a growing population is well on its way. The combination of Vion Ingredients with Darling International will create the global leader in converting edible and inedible bio-nutrients streams into specialty products and ingredients for the food, feed, fuel, fertiliser and pharmaceutical industries. We are truly excited to have the opportunity to join forces with the Vion Ingredients management team and bring this transformational platform to our suppliers, customers and employees. Furthermore, this transaction will further diversify Darling International’s revenue and EBITDA profile both geographically and from a product line point of view.”

2012 was a particularly challenging year for Vion. The company endured an equity loss of €100m last year as well as a net loss of €830m, compared to a net gain of €14m in 2011. For 2012 the company recorded revenues of around €1.6bn and earnings before interest, tax, depreciation and amortisation (EBITDA) of €200m. For the 12 months up to 30 June 2013, Vion reported revenues of €1.7bn with EBITDA of around €210m.

The deal for Vion is the second acquisition by Darling in recent months. The company acquired another rendering business, Rothsay, from Maple Leaf Foods for C$645m. The deal for Rothsay was completed in late October. According to a companystatement Vion Ingredients, its brands and geographies will continue to be led by the firm’s chief executive Dirk Kloosterboer. In addition to his current responsibilities, upon closing, Mr Kloosterboer will be named chief operating officer of Darling and appointed to the company’s international board of directors.

Richard Summerfield