Nomad Foods to buy Birds Eye owner Iglo for €2.6bn

Iglo Group, Europe's largest frozen food group and the maker of Birds Eye fish fingers, is being acquired for €2.6bn by Nomad Foods of the US - in a deal that takes advantage of the growing strength of the dollar against the euro.

Martin E Franklinand Noam Gottesman, the consumer goods tycoons that set up Nomad a year ago, will take control of Iglo from private equity group Permira, which will retain a 9 per cent stake.

"For a US dollar-denominated company like ours, it is not a bad time to invest in Europe," said Mr Franklin, who built up Jarden from a $120m jar-maker into a consumer goods empire with a market capitalisation of $10bn.

The serial investors told the Financial Times that the acquisition of Iglo - which has a 30 per cent share of the European frozen food market, through its operations in the UK, Germany and Italy - would be the first of a number of deals as they build Nomad into a global consumer brands business.

Mr Gottesman, who is also founder and head of investment firm Toms Capital, added: "We look at this deal as the foundation investment . . . through prudent M&A we plan to opportunistically consolidate what is a fragmented market."

Iglo is headquartered in the UK, which means that it will have a lower tax bill than if based in the US - a factor that Nomad executives said was also taken into consideration.

Permira, which bought Iglo from Unilever for €1.9bn in 2006, said it was attracted by Nomad's approach to merger and acquisitions. "We think Nomad's strategy is fantastic and want to stay invested to benefit from the upside of industry consolidation," said Cheryl Potter, head of the private equity group's global consumer team.

Permira said it had made a 2.4 times return on its original investment.

Nomad's move for Iglo is the latest in a spate of food deals, mostly in the US, including last month's acquisition of Kraft Foods by Brazilian private equity group 3G and Warren Buffett's Berkshire Hathaway, in order to merge the business with Heinz.

Mr Franklin and Mr Gottesman said that Iglo, which has about 2,800 employees across Europe, was attractive to them as it is highly cash generative, has a strong management and a pipeline of innovations.

Elio Leoni Sceti, the former chief executive of EMI Music group who became head of Iglo two years ago, will step down in June, but will remain as a non-executive director of Nomad Foods. He is leaving to become chief executive of US cosmetics group Coty.

Iglo's sales of €1.47bn last year were down 2 per cent compared to 2013 - partly because Mr Leoni Sceti had sold off underperforming product lines, such as TV dinners, but also because of tough conditions in the UK and Germany, two of Iglo's biggest markets.

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Its pipeline of new products includes whole-grain fish fingers to tap into growing consumer demand for healthier products and to appeal to new shoppers.

Iglo's earnings before interest, tax, depreciation and amortisation (ebitda) stood at €306m last year.

Nomad's executives said that Iglo's shares appeared undervalued, trading at 8.5 times ebitda, compared with about 13 times for Pinnacle Foods, the US frozen foodmaker.

Nomad, which is listed on the London Stock Exchange, is likely seek a primary listing of its shares on the New York Stock Exchange.

Europe's stagnant economic conditions were not a deterrent for Nomad to make a deal as Mr Gottesman said that "an economy can be strong or weak but people's appetite for food doesn't change."

Barclays, UBS and Greenberg Traurig advised Nomad on the transaction, while Centerview Partners, Skadden and Clifford Chance acted as advisers to Iglo.

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