Raisio announced a public offer to acquire the entire issued share capital of Glisten last month and on Friday the shareholders of the UK firm approved the terms of the acquisition, which is expected to be completed in April.
The acquisition values Glisten at approximately £19.8m. (€21.7m)
Timo Heinonen, an analyst at Carnegie Investment Bank, said the deal would allow Raisio to benefit from significant “cross-selling opportunities” and he added that the move is clearly in line with the group’s stated strategy of entering small and growing product segments.
“Acquisition of a niche player rather than initiating a green field operation through the launch of a brand in a new market is clearly a more cost effective and less risky approach to portfolio development,” argues Heinonen.
While the company’s EBIT will be impacted obviously in the short term, he continued, the acquisition will boost the brand division as well as the group’s overall growth and profitability.
Cross-selling
Heinonen told Nutraingredients.com that the group will most likely rebrand the Glisten range for marketing purposes in Finland and Sweden and central European countries and this provides Raisio with huge growth potential as the brands have no previous history in that geography.
Furthermore, the UK foothold will serve as a launch pad for central European expansion, he argues, in terms of Raisio’s brands that currently lack an international positioning such as the Elovena iron rich oat cereals and drinks, Sunnuntai baking mixes and Carlshamm dairy products.
Further expansion
Raisio has stated that it has an acquisition budget of €400m and the industry commentator forecasts that the Finnish group, in 2010, will acquire three to four further functional food players with strong brands in their local markets, with the most likely targets being companies in central and Eastern Europe.
Commenting on the acquisition, Matti Rihko, CEO of Raisio said the price offered reflects Raisio's strong confidence, both in the management and in the business potential the merger of the two companies will create, while Glisten CEO, Paul Simmonds, said the move will develop Glisten's position as one of the leading snacking businesses in Europe.
Raw materials
As far as likely risks and uncertainties for Raisio in the year ahead, Heinonen cites volatility in the grain market as the only potential ripple but he stresses that market conditions are such that grain prices look set to be stable over the coming months.
“Upward price levels in terms of grain commodities are predicted and this will benefit Raisio as its fixed costs decrease and its topline moves upwards based on higher prices at the retail level,” said the analyst.