Norway's Orkla has entered into a partnership with private equity firm Rhône to focus on investments in businesses with a transatlantic presence.
The partnership will see investment funds affiliated with Rhône acquiring 40% ownership in Orkla Food Ingredients AS (OFI) for an enterprise value of NOK 15.5 billion (€1.31 billion), the company added.
The move will enable OFI to continue its growth journey by building upon and consolidating its existing businesses.
It seeks to create shareholder value through volume growth, margin improvements, capital efficiency and structural growth.
Orkla president and CEO of Orkla, Nils K Selte stated, "The partnership search for OFI attracted strong interest. I am proud that we are joining forces with a best-in-class organisation in Rhône. The Rhône team’s partnership commitment and strategic attributes clearly stood out.
"This is a landmark deal for Orkla that puts OFI in a position to continue its organic and structural growth journey. This transaction is an example of the flexibility and value creation ambition that we have sought to create with Orkla’s new operating model."
Upon completion of the transaction, OFI will replace Orkla's existing financing with a NOK 6.4 billion (€540 million) committed bank facility (which will not be fully drawn at closing) and will not involve Orkla ASA's recourse. This facility will include net debt to EBITDA and interest cover covenants.
Furthermore, OFI's balance sheet will feature a subordinated long-term payment of approximately €89 million to Orkla ASA.
The equity value of OFI, based on a 100% ownership, amounts to roughly NOK 6.5 billion (€550 million), taking into account other adjustment items.
Rhône will retain the option, exercisable until 31 March 2027, to purchase an additional 9% of OFI equity at the same share price as the transaction announced on 26 October 2023.
Patrick Mundt, managing director of Rhône said, "Rhône is pleased to partner with Orkla in this next phase of OFI’s growth. OFI is a market leader across many European countries and in North America, where its differentiated regional and local approach to its customer base is value enhancing.
"We look forward to partnering with Orkla to assist OFI in building on its existing foundation and support OFI’s management team in driving the company’s continued growth and development over the coming years."
About The Deal
The transaction is expected to close by the end of the first quarter of 2024, subject to customary closing conditions, including approvals from relevant authorities.
Orkla and Rhône will have representatives on OFI’s board of directors, led by Orkla executive vice president, Øyvind Torpp.
Johan Clarin will continue as CEO and manage OFI on the basis of its business plan, Orkla added.
Clarin commented, "This transaction is testament to the success, strength and resilience of OFI built over many years. I am very proud that a firm of Rhône’s calibre has decided to invest in OFI and partner with Orkla.
"We will now have two strong and capable owners joining forces to develop OFI as a leading ingredients business in Europe and North America. We look forward to driving continued growth, accelerate our margin expansion and make value creative investments with the support of our shareholders."
BofA Securities acted as financial adviser to Orkla and Rothschild & Co acted as financial adviser to Rhône.