Mars buys P&G's pet food brands in $2.9bn deal

Ashley Armstrong
09 Apr 2014
The Telegraph UK
MARS, the maker of M&Ms and Snickers, yesterday spent $2.9bn (£1.7bn) buying pet food brands Eukanuba, IAMS and Natura from consumer giant Procter & Gamble.
The trio of brands will be added to Mars’ existing pet food business which includes Whiskas cat food and Pedigree Chum. The deal is the biggest in five years for the Mars bar maker since its $23bn Wrigleys gum deal in 2008.
The US conglomerate is buying the rights to the brands in North America, Latin America and other selected countries which account for 80pc of Procter & Gamble’s global pet food sales in total.
Procter & Gamble, which also owns Gilette razors and Fairy Liquid, said that it could sell its European pet care business to different buyers. The company said it “is developing alternate plans to sell its Pet Care business in these markets”. Analysts said likely private equity could be interested, or smaller independent players as larger peers like Nestle would face competition issues.
Procter & Gamble, like many of its rival consumer goods goliaths, is attempting to streamline its business and has announced plans to cut $10bn of costs in five years. However, the group has faced extra pressure from activist investor Bill Ackman who has agitated for an acceleration of cost cutting measures.
Ali Dibadj, an analyst at Sanford Bernstein, said that the disposal had been decades in the making. “P&G has been trying to exit its food business, selling most recently its Folgers coffee brand and Pringles.”
Mr Dibadj said that at $2.9bn Procter & Gamble had secured a good price for the asset, roughly 18 times its underlying earnings.
Procter & Gamble is the fourth-biggest player in the petfood market, but a long way behind Mars and Nestle which together control almost half of the business.
Mr AG Lafley, the chairman, president and chief executive of P&G, said: “Exiting pet care is an important step in our strategy to focus P&G’s portfolio on the core businesses where we can create the most value for consumers and shareowners. The transaction creates value for P&G shareowners, and we are confident that the business will thrive at Mars, a leading company in pet care.”
Eukanuba, IAMS and Natura brands all focus on the high-end part of the pet food market, with IAMS best known for its slogan “I am an IAMS cat”.