Why has the ‘Chicken King’ sold poultry arm to himself?

It looks initially like a case of creative accounting, but the sale of Boparan Holdings’ European poultry business to the family office of owner Ranjit Singh Boparan is being framed as a “transformational” win-win.

The “arm’s length” €200m sale by the parent of 2 Sisters Food Group will see its 2 Sisters Storteboom subsidiary transferred to Singh’s Boparan Private Office (BPO). The deal is due to complete later this month, subject to approval by Polish competition authorities.

So, what is the ‘Chicken King’ up to? And what does the deal mean for 2 Sisters Food Group and his wider business empire?

The sale (and the setting of the transaction price) follows “an independent third-party valuation”, 2 Sisters stresses.

It will see Storteboom join the likes of Bernard Matthews, Banham Poultry and Elkes Biscuits under the umbrella of the BPO, along with Singh’s extensive portfolio of restaurant businesses such as Carluccio’s.

Storteboom, which employs about 2,700 staff at six poultry processing centres in the Netherlands, and a further three in Poland, was acquired by 2 Sisters in April 2010 during a period of rapid growth for the poultry giant, which also snapped up food manufacturer Northern Foods in January 2011.

Sluggish European market

2 Sisters points to a particularly challenged European poultry market as a key consideration behind the sale.

As well as global inflationary and energy pressures, the Dutch market has faced an influx of “aggressively traded” Ukrainian poultry in the wake of Russia’s invasion in 2022.

This, coupled with “restrictive agricultural policies adopted by the Dutch government”, has “compromised the Dutch market and adversely affected prices”, it says.

But the primary driver of the sale is Singh’s push to strengthen 2 Sisters’ balance sheet, cut its debt pile and focus on its core UK poultry operation. This has been an ongoing process since a chastening appearance by Singh in front of the Commons Efra committee in October 2017 in the wake of a Guardian/ITV exposé alleging food safety violations at its West Bromwich factory, and following several years of losses.

A turnaround plan initiated by Singh and former CEO Ronald Kers in 2018 has prompted a series of deals to divest non-core operations. Goodfella’s, Fox’s Biscuits and Holland’s Pies – all part of the Northern Foods portfolio – were among those sold last year.

The divestments have chipped away at a debt pile understood to have been in excess of £1bn in 2016. And while Boparan Holdings still posted losses of £23m in its most recent accounts, the sale of Storteboom will, The Grocer understands, bring that debt down to between £300m-400m – its lowest level since Boparan Holdings’ acquisition of Northern Foods.

A strengthened balance sheet ahead of a planned refinancing of that debt next year therefore gives the business “attractive options”, it says. At the same time, such a “significant and transformational deal” unlocks Singh’s ‘Next Generation’ plans to modernise the business with a strong emphasis on technology, automation and improving animal welfare, he adds.

Moving Storteboom into the BPO – a hefty operation that itself turns over £2bn annually – also gives the business “a dedicated regional focus [for] its European markets, unlocking undoubted growth opportunities through a focus on quality, animal welfare and sustainability”, he points out.

Win-win

While on the surface the sale looks like a simple asset reorganisation, “it kills many birds with one stone”, one industry insider says. “He’ll pare down debt at 2 Sisters, which will make the business attractive for investors, and he holds on to an underperforming asset which he sees long-term value in.”

In addition to greater bandwidth to turn the business around, Singh has “cheaper financing facilities in the BPO, so this move puts the debt leverage at a level which gives him more options on the refinancing”, adds a City source.

“Flipping it to the family office is a win-win. He gets to keep the business until it starts delivering performance and then he could reconsider how core it is.”