Stockholm / SE. (cab) Cloetta AB has signed an agreement to acquire Candyking Holding AB – a leading concept supplier of pick and mix candy in the Nordic countries and the United Kingdom. The acquisition strengthens Cloetta’s position within pick + mix and creates substantial synergies. This is in line with the strategy to grow within the category since it is an important and in many countries growing part of the confectionery market.
«The acquisition of Candyking will significantly strengthen Cloetta’s position in Denmark, Norway and the United Kingdom. Cloetta will be able to develop the Candyking brand and product offering, in order to offer an attractive customer and consumer experience. The acquisition will also strengthen our position in natural snacks with the Parrot brand. In addition, there are substantial cost synergies that make the acquisition attractive», says Danko Maras, CFO and outgoing CEO a.i., of Cloetta.
Candyking offers stores a complete concept in pick and mix candy including products, displays and accompanying store and logistic services. Candyking itself does not manufacture any products, instead they purchases products from different suppliers. The company currently supplies approximately 8’000 retail outlets in seven countries. Sweden, the United Kingdom, Norway and Denmark are the largest markets. Other markets are Finland, Ireland and Poland. In total Candyking have approximately 370 employees.
Candyking’s total sales (including Danish tax) amounted to approximately 1’300 million SEK on a rolling twelve month basis per the third quarter of 2016. Underlying Ebitda was approximately 70 million SEK and underlying Ebit approximately 30 million SEK.
Candyking’s trademarks in confectionary are Candyking, Karamellkungen and Candyking Favourites. The company is also a leading pick and mix supplier within natural snacks in Sweden and Finland under the Parrot brand.
The acquisition is expected to create substantial synergies that will gradually be realized during the years 2017 to 2020. Synergies will be created within administration, procurement, logistics, sales and through insourcing of production. The final outcome of the synergies is dependent on volume development. Cloetta intends to, following completion of the transaction, revert with information regarding expected synergies and non-recurring costs. The Cloetta group’s target of an underlying Ebit margin of 14 percent stands firm.
The transaction
Cloetta has agreed to acquire 100 percent of the shares in Candyking as well as 100 percent of Candyking’s outstanding bond and other debt. The initial purchase price amounts to 325 million SEK on a cash and debt free basis with a potential additional purchase price of maximum 225 million based on the result of Cloetta’s and Candyking’s combined sales volume of pick and mix in confectionary and natural snacks in the Nordic countries, the United Kingdom and Poland during 2018. The seller of the shares is Candyking’s CEO, Dani Evanoff. The majority of the initial purchase price and the potential additional purchase price will be allocated to the holders of Candyking’s 750 million SEK bond loan. In connection with closing of the acquisition, Candyking’s bonds will be delisted from Nasdaq Stockholm. At the same time Cloetta will issue an earn-out instrument to the current bondholders that entitles to the future potential additional purchase price. The instrument will be registered at Euroclear in order to facilitate the distribution of any additional purchase price to the current bondholders. The transaction is subject to approval from the Swedish Competition Authority.
Financing and Advisors
The acquisition will be financed by Cloetta using cash and its existing credit facilities. Handelsbanken Capital Markets has been financial advisor to Cloetta and Advokatfirman Cederquist has been legal advisor. KPMG contributed with support regarding financial due diligence.
