Advice for Cloetta on Lonka acquisition

The client
Cloetta AB was founded in 1862 and today is a leading confectionery company in the Nordic region, the Netherlands and Italy. Cloetta products are sold in more than 50 countries worldwide. In 2012, Cloetta acquired LEAF from private equity funds CVC and Nordic Capital and has made several smaller acquisitions in recent years. Cloetta owns some of Europe’s strongest confectionery brands, such as Redband, Venco, Sportlife, Läkerol, Jenkki, Malaco, Saila, and Sperlari. The group operates 11 production units in six countries and generated sales of around EUR 575 million in 2014. Cloetta’s class B-shares are traded on NASDAQ OMX Stockholm. 

The case
Cloetta is an ambitious company with its sights set firmly on continued growth, both organic and via acquisitions in Europe. NIBC’s Food, Agri, Retail & Health team has built up a deep knowledge of the confectionery industry since the acquisition of LEAF by CVC Capital and Nordic Capital in 2005. Over the years, NIBC has established a strong relationship with LEAF management and subsequently with the Cloetta management board in Sweden and has discussed M&A opportunities on a regular basis. Although, NIBC had already explored the opportunity for Cloetta to acquire Lonka in early 2013, it took another two years to successfully introduce Cloetta as a potential acquirer to Lonka.

Lonka Group was founded in The Netherlands in 1920 and was acquired by the current family owners in 1997. The company’s confectionery products are produced in two Dutch factories, one in Roosendaal and one in Dieren. Through its market leadership in fudge and soft nougat the company has a unique positioning in ‘adult candy’, one of the markets Cloetta is targeting for growth. The product range is largely sold under their own Lonka brand. Lonka booked sales of around EUR 32 million in 2014.

The acquisition of Lonka would significantly strengthen Cloetta’s position in the Netherlands, as well as open up growth opportunities for the Lonka brand in other Cloetta product categories and geographies.

The solution
Following the annual visit to the Internationale Süßwaren Messe (ISM) in Cologne in early 2015, the NIBC team reconnected to Lonka CEO and majority owner Aimé de Bock to introduce Cloetta and to discuss the opportunity of a potential merging of Lonka into the Cloetta family of brands.

After NIBC successfully introduced Cloetta to Lonka, NIBC was mandated to provide financial advice on the potential acquisition of Lonka. Following a non-binding offer by Cloetta, Lonka agreed to enter into exclusive negotiations and Cloetta was able to conduct a full due diligence with the help of accountancy firm Deloitte and law firm Houthoff Buruma.

De deal was signed and closed on 17 July, with Cloetta acquiring 100 per cent of the shares of the Lonka holding company, in an all-cash transaction. The acquisition made Cloetta the number one player in the Dutch confectionery market and significantly strengthened its position in a number of other European markets.

“Lonka is a well-known brand that will significantly strengthen Cloetta’s positon in the Netherlands. The acquisition will diversify Cloetta’s product range into new technologies and categories, including the Dutch chocolate market. It will also create cost synergies, thereby over time supporting Cloetta’s EBIT margin target of 14 per cent. In addition, there are long term revenue synergies that can be realized”, said David Nuutinen, incoming Cloetta CEO.

“We are very pleased to become part of the Cloetta Group. With Cloetta’s focus on brands and strong routes-to-market, especially in the Netherlands, I am convinced that we will be able to further strengthen the Lonka brand”, said Aimé de Bock, CEO of Lonka. 

This transaction demonstrates NIBC’s intrinsic knowledge of the international confectionery industry and shows that building long-term relationships will ultimately translate into successful M&A deals for our clients.