Intermoney | Ebro Foods (EBRO) closed and executed on Friday December 31 the sale to CVC of Panzani’s dry pasta, couscous, sauces and semolina businesses for €550mn (100% of the business) enterprise value. Included in the sale are the related operating assets: the La Montre, Nanterre, and Vitrolles plants, as well as the Gennevilliers, Littoral and St. Just mills.
In 2005, Ebro paid for all Panzani businesses a total of €639mn in enterprise value, of which €302mn was in debt. These segments achieved 2020 sales of €470mn (16% Ebro 2020 sales) with an adjusted operating profit of €57mn.
With this transaction, the company maintains Panzani’s fresh and rice segments, thus advancing its growth strategy and reinforcing the premium, fresh and convenience businesses in which it is already a world leader.
Impact and valuation – The €550mn transaction comprises 100% of Panzani’s share capital, excluding Lustucru Selection and Taureau Ailé which will remain in the Ebro group. As a result, there would be a significant reduction in the company’s operating costs from the sale of these segments, which amounted to €413mn in 2020 (16% of total Ebro 2020 costs).
On the other hand, Ebro’s bank debt at 9M’21 was above €600mn with a net debt of €904mn. Thanks to the sale and assuming the €355mn of EBITDA in 2020, the transaction implies a fall in the ND/EBITDA multiple to around 1x ND/EBITDA compared to 2.7x ND/EBITDA in 2020. These debt levels would generate some room for both organic and inorganic growth operations.
The price implies an EV/Sales ratio of 1.2x and EV/EBITDA of 9.6x in 2020, together with a capital gain from the deal amounting to €91mn. This generates in valuation terms around €0.6/share (+3%) at our target price of €19.8.