Perkins Foods Holdings Ltd.

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Perkins Foods Holdings Ltd.

BUTCHER BEGINNINGS IN 1948

Before emerging as one of a number of rapidly growing food-based holdings companies in the late 1980s, Perkins originated as a small butcher company, founded by John Perkins in 1948. That company, John Perkins (Meat Packers) Ltd., remained focused on the butcher meats market for the next several decades, evolving into a prominent supermarket supplier by the mid-1980s. In 1985, John Perkins Meats went public, listing its stock on the London Stock Exchange’s Unlisted Securities Market (USM). That listing, however, was described as a near flop, and only the last-minute decision of Atlanta Securities Investment, the investment division of the Grovebell group run by British-Asian entrepreneur Vasant Advani to subscribe to the entire share offering, saved the listing.

The share purchase initially appeared to be part of Advani’s diversification plans for Brookbell, which at the time had been making a drive to enter the medical equipment manufacturing sector. By 1987, however, Perkins, and especially its USM listing, became a target of interest for two former Ross Foods executives, Michael Davies and Howard Phillips, who took over the company by buying out the shares still held by the Perkins family. Davies became chairman of the company, while Phillips took on the managing director position.

Davies and Phillips immediately set Perkins on a new course, essentially using the company, and especially its public listing, to embark on a stream of acquisitions. As such, Perkins became part of an ongoing trend in the British and European food sector at the end of the 1980s and into the early 1990s. The run-up to the lowering of trade barriers among European Union members in 1992 had sparked a widespread consolidation effort among European food companies. At the same time, dramatic changes were occurring within the food industry. The prepared foods segment had begun to grow strongly in the late 1970s and through the 1980s, in part because of the large-scale arrival of women into the workforce. With less time to cook, consumers turned to the growing list of prepared foods on offer. Manufacturers encouraged this trend, spending massively on advertising, which played an important role in convincing consumers that, indeed, they did not have enough time to cook a proper meal for themselves. The higher value-added nature of prepared foods, and the potential for further reducing costs and driving up profit margins through the inclusion of a growing list of additives and food substitutes, represented billions of future profits for the food industry.

Perkins embarked on a large-scale acquisition drive into the 1990s. Along the way, the company shed the original John Perkins (Meat Packers) operation, which was spun off into a management buyout in 1989. Between 1987 and 1991, Perkins completed an impressive list of 25 acquisitions, spending more than £154 million, compared to the company’s sales of less than £22 million in 1987.

Perkins targeted two primary areas for its initial growth phase. On the one hand, the company entered the booming market for “out of season” fruits and vegetables, largely through its acquisition of a Dutch specialist in this area, Hage BV, in 1989. That company dealt directly with the Netherlands’ army of greenhouse growers, but also negotiated for exclusive supply contracts for fruits and vegetables from around the world. Far larger than Perkins itself, the Hage acquisition helped transform Perkins into one of the fastest-growing of the new food products consolidators in the United Kingdom at the beginning of the 1990s.

The entry into the Netherlands formed part of the group’s larger objectives of extending its operations outside of the United Kingdom and establishing itself as a North European foods group. Perkins continued to seek further acquisitions in the Netherlands, and into the early 1990s targeted a new area, mushrooms, through the purchases of Champifri, Champex, and Holland Champignons, which operated in the freezing and chilling; distribution; and canning segments, respectively.

Perkins other major target market was for value-added convenience food products. For this, the company centered on both the chilled and frozen foods categories. Again, Perkins’ interest led it to a series of international acquisitions, including Bakker Lekkerberk, a frozen fish fillet specialist, and Van der Made, a specialist in prepared frozen potato meals, both in 1989, and Enkco BV, in 1991, in the Netherlands. Other acquisitions of the period included Peppino’s Pizza and G&K Potato in Germany, Luxembourg’s Cogel, a pasta dish producer and distributor primarily active in France, and the United Kingdom’s Anchor Seafoods, StudleighRoyd, and sausages specialist Fellside Foods, among many others.

KEY DATES

1948:: John Perkins (Meat Packers) Ltd. is established.
1985:: Perkins goes public on the London Stock Exchange’s Unlisted Securities Market.
1987:: Perkins is acquired through management buyout led by former Ross Foods executives Michael Davies and Howard Phillips, who launch company on acquisition drive.
1989:: Sell-off of original John Perkins meat business occurs as company focuses on frozen and chilled prepared foods and fresh produce.
1998:: Company sells fresh produce and expands frozen and chilled foods operations.
2000:: Company goes private in management buyout backed by ABN-AMRO.
2006:: Perkins completes sale of various divisions as part of possible larger breakup.

The company’s acquisition drive helped boost the company’s total sales past £133 million by 1989 and again to nearly £200 million by the end of 1990. If fresh foods, led by the Hage division, had been the company’s largest operation at the end of the 1980s, in the early 1990s frozen foods emerged as the company’s primary growth driver. By the end of 1991, growth at this division especially helped push the group’s total revenues past £260 million.

Through the first half of the decade, however, Perkins suffered from a general backlash against the United Kingdom’s large number of “growth-by-acquisition” companies. Like Perkins, these companies had begun as small operations using acquisitions to fuel larger ambitions. Into the early 1990s, as the British and European economies slid into an extended recession, a large number of these companies had collapsed. Among the surviving companies, many found their profits hammered. In the case of Perkins, which was considered to have more successfully structured its acquisition plan than its rivals, profit growth largely stagnated into the middle of the decade. As a result, the investment community turned against the company. Throughout much of the rest of the decade, the company’s share price remained consistently undervalued.

BREAKING UP IN PRIVATE

Perkins’ acquisition effort slowed considerably through the mid-1990s, as the company instead focused on consolidating its operations. Through this period, Perkins narrowed its range of operations around a core of Frozen Foods, Chilled Foods, and Fresh Fruits and Vegetables. The company’s attempt to enter the mushroom market had been less than successful, and these operations were reorganized as noncore business. By 1996, the company had also shed its shellfish businesses as well.

As part of its emergence as a matured food products group, Perkins began seeking synergies among its various operations. The company’s Bakker and Enkco divisions, both in Holland and focused on similar product categories but differentiated end markets, began to coordinate their operations during the second half of the 1990s. The company’s Cogel distribution operation, based in Luxembourg, which already oversaw its Tavola branded pasta production operations, took over distribution of the popular German Peppino brand. As a result, Peppino was able to make rapid inroads into the French market as well. At the same time, the Tavola brand also served as a distribution vehicle for the production of another Perkins holding, VDM in the Netherlands, which specialized in the production of stir-fry ready meals. Similarly, Perkins’ G&K operations in Germany launched other products in the VDM into the German market. By 1998, the company’s sales topped £388 million.

Into the late 1990s, as the European economy once again entered a growth phase, Perkins began to seek new expansion opportunities. The growth of the company’s frozen and chilled foods operations, and the relatively poor growth at its fresh produce operation, encouraged the company to exit that business. In 1998, the company agreed to sell that division to Greenery International for £123 million. Instead, Perkins invested an initial £9.7 million in the acquisition of Fresh-Pak Chilled Foods, based in Leicestershire, in England. That company, originally founded as Fresh-Pak Eggs in the early 1980s, had evolved into a major producer of sandwich fills, snack salads, and dips.

That acquisition signaled the launch of a new acquisition drive by the company. Between 1999 and 2000, the company acquired several more companies, including France’s Traditions d’Asie and Le Magicien Vert, both ethnic foods specialists; Fraisnor, a producer of chilled pasta meals, also based in France; a stake in British ethnic food group Mrs Lam’s; the Dutch poultry products group Brink Pluimveeprodukten Holking BV; and Britain’s Lenders Foods Ltd., which produced stir-fry ready meals and sauces. These acquisitions helped rebuild the company’s revenues after the sell-off of its product division, with sales nearing £375 million.

Despite its strongly focused growth strategy, Perkins not only remained hampered by the investment community’s mistrust of midsized food stocks, its shares remained undervalued, placing it at the bottom of the list, despite a stronger performance than many of its rivals. The company’s low share price soon positioned Perkins as a potential takeover target. By 2000, the company had been approached by Irish foods group, Greencore. The two sides were unable to agree on a selling price, however.

In frustration, then Perkins Chief Executive Ian Blackburn declared to the Financial Times: “The stock market is there to provide capital to enable businesses to grow. Our business has grown substantially over the past three years, but our market value has come down.” In the end, Blackburn and other Perkins executives led a new management buyout, valued at £230 million, backed by Dutch banking giant ABN-AMRO, in December 2000.

Through the first half of the decade, Perkins continued to invest in its ongoing operations. In 2003, for example, the company spent £7.5 million on the construction of a new factory for its U.K.-based fresh foods operations, under the Fresh-Pak Chilled Foods subsidiary. Yet, as it approached mid-decade, the company, and especially ABN-AMRO, appeared to be seeking to cash in on the buyout investment. In 2004, the company announced its decision to put up for sale its U.K.-based Chilled Foods division, in part to test the water for a further breakup of the group’s holdings.

The Chilled Foods division was sold to rival U.K. foods group Cranswick in 2005. The company continued to streamline its holdings, and in March 2006 announced the sale of the Le Magicien Vert ethnic foods operation to French foie gras group Delpeyrat. By the end of that year, the company had completed the sale of its Enkco BV operations in the Netherlands, as well, again to Cranswick. While the company regrouped around a new core featuring its Fresh-Pak business, the future existence of a Perkins Foods Holdings had increasingly become doubtful.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

Bakker Lekkerkerk BV (Netherlands); Brindélices (France); Brink Pluimveeprodukten BV (Netherlands); Deli-Fresh Chilled Foods Limited; Fraisnor SA (France); Fresh-Pak Chilled Foods Limited; Le Gourmet Beaujolais (France); Perkins Foods France; Perkins Foods Luxembourg sa; Perkins Frozen Foods International bv (Netherlands); Tavola (Luxembourg); VDM (Nether-lands).

PRINCIPAL COMPETITORS

Unilever; Grampian Country Food Group Ltd.; Brake Brothers Ltd.; Northern Foods PLC; Uniq PLC; Bernard Matthews Ltd.; Cranswick PLC; Farmfoods Ltd.; Kerry Foods Ltd.; Tulip Ltd.; Warburtons Ltd.; Roach Foods Ltd.; Prize Foods Group Ltd.