The owner of canned giant Princes struck a £700m deal this week with Newlat as the Italian food group went back on an earlier decision to walk away from the deal.

Announced on Monday, Japanese conglomerate Mitsubishi Corporation agreed to sell the entirety of Princes to listed group Newlat in a deal the latter said would make it one of Europe’s major multi-brand players in food.

The addition of Princes’ £1.8bn of sales will take Newlat – which will be renamed New Princes Group – to €3bn (£2.6bn) of turnover and underpin its quest to reach €5bn of turnover by 2030.

The sales process, which was kicked off under investment bank Houlihan Lokey 18 months ago, saw initial bids come in at a lower value than Mitsubishi was willing to accept. Potential buyers were cautious over the impact of soaring inflation and input costs.

It is understood Newlat had earlier agreed to buy Princes in a deal worth approximately £700m, but walked away from negotiations in February after submitting a lower offer than was rejected after citing a “challenging market environment” in the UK and “pressures on both sales volumes and on retailers’ demands for price reductions”.

However, Princes was able to demonstrate a rebuilding of margin and earnings in the financial year ended March 2024 to entice bidders back to the table.

Newlat is understood to have re-engaged about a month ago.

One City source suggested Princes meeting its forecast of hitting £100m in EBITDA, up from around £70m the previous year, helped increase confidence.

The dealmaker also suggested Princes’ Napolina range was the “jewel in the crown” of its portfolio in terms of appeal to pasta maker Newlat, but played down suggestions it could look to break up Princes.

“They have been quite clear in focusing on turnover growth and have already acquired a disparate portfolio of brands in Symington’s, so it wouldn’t seem make sense to immediately look to sell off Princes’ brands,” he said.

It is believed that Princes was also marketed as a break-up opportunity for private equity, but PE bidders, thought to include Epiris, were unable to match Newlat’s valuation.

Observers also noted that Princes was in Newlat’s sweet spot of mature branded assets, with high turnover that they could acquire at lower multiples than high-growth companies – illustrated by its acquisition of Symington’s and previous failed pursuit of Hovis.

As part of the deal, Mitsubishi will take a £50m stake in the new group, while Newlat will raise £650m of cash from its own resources and loans.

The newly expanded New Princes Group will have a global operating network of 31 factories and a diversified portfolio across 10 categories.

Newlat said the deal will see it become the largest listed food player on the Milan stock exchange.

Angelo Mastrolia, chairman of Newlat Food, commented: “The newly combined group will offer a broad range of high-quality products, addressing the needs of an increasingly demanding and diverse global market.

“This transaction enables us to enter new market segments and better serve our customers with an even more comprehensive, innovative, and unique product offering.”

Shaun Browne, chairman of consumer, food and retail, Europe at Houlihan Lokey commented: “We are delighted to have worked with Mitsubishi on such an iconic transaction, which is highly likely to be one of the largest UK food deals of the year. Congratulations to Newlat after such a long and extended period of negotiation.”

 

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