Bloomberg News

Orkla Seeks Larger Acquisitions, New Markets in Brands Push

October 17, 2011

(Updates with comment from analyst in fifth paragraph.)

Oct. 17 (Bloomberg) -- Orkla ASA will seek larger takeovers in its push to expand in consumer brands and foods as the Norwegian company sells its aluminum and solar energy assets.

“Our financial flexibility at the moment is quite good and it will be even better when we have exited some other areas -- that will of course be the fuel for our growth,” Torkild Nordberg, head of the Oslo-based company’s brands unit, said in an interview. “Our aim is to search for bigger acquisitions.”

Chairman Stein Erik Hagen, a Norwegian billionaire, has announced the company will sell off assets such as its 39.7 percent stake in Renewable Energy Corp. ASA, and the Sapa aluminum unit to focus on its brands business. The company earlier this year sold Elkem to China National Bluestar Group Co. for about 13 billion kroner ($2.32 billion)

The brands business, which makes everything from Grandiosa frozen pizzas to Pierre Robert hosiery, will look for larger acquisitions as well as smaller, more short-term profitable add- ons, Nordberg said on Oct. 14. An expansion may include new categories of brands and markets outside its existing presence in the Nordic and Baltic countries, Russia and India, he said.

Orkla shares rose 0.6 percent to 48.08 kroner as of 3:28 p.m. in Oslo.

Sensible Try

“It’s sensible for them to try to make something bigger of it,” said Arild Nysaether, an analyst with Fondsfinans ASA in Oslo with a “buy on the stock. “If you look at where Orkla has really done well over the last several decades it has been in the operations within brands in terms of being able to grow organically and fine tune the operations to extract margins.”

Orkla Brands said last month that it aims for growth in annual earnings before interest, tax and amortization of 10 percent through a “balanced” split between organic and structural expansion. The company has spent about 8.15 billion kroner between 2004 and 2010 on acquisitions larger than 100 million kroner, including the 3.1 billion-krone purchase of Finnish snack company Chips Oyj and the 928 million-krone takeover of Dansk Droge, a maker of vitamins and supplements.

The company has added sales of about 1 billion kroner a year from acquisitions, on average, which it’s now seeking to exceed, Nordberg said. The executive doesn’t expect to find any “big bargains” because prices have remained stable, he said.

Speeding Up

“We have to speed up that growth and with a more focused Orkla we have ambitions to increase the structural growth,” he said. While he declined to comment on specific targets or possible categories he said he couldn’t rule out revisiting a move on Jotun AS should an agreement be reached with the family shareholders or re-entering the brewery and soft drinks business.

Orkla last month failed in a $933 million bid for the remainder of paintmaker Jotun after the family controlling the business rejected the takeover. Orkla owns 42.5 percent of Sandefjord, Norway-based Jotun. Orkla sold its stake in Carlsberg Breweries in 2004 for 12.5 billion kroner.

Orkla Brands has almost 80 production facilities in 17 countries and owns brands from Norway’s Stabburet and Lilleborg to Russia’s chocolate and confectionary companies Krupskaya and SladCo, which were merged this year. The unit had sales of 23.6 billion kroner last year. Its Ebita rose 6.2 percent to 2.97 billion kroner.

Selling Bakers

Orkla Brands made 11 company acquisitions and one brand purchase last year alone. In the past year, the company has bought Dagens AS, a pizza producer, and Indian spice company Rasoi Magic Foods. In 2007, it bought India’s MTR Foods Ltd., which has since doubled its sales and is growing at more than 20 percent a year, Nordberg said.

The company is still working on the sale of Bakers, a Norwegian baking company, which was expected to close during the first half. “There are buyers,” he said. “I will not set a new deadline but hopefully we’ll sort it out. We are putting a lot of pressure on ourselves to make it happen.”

--With assistance from Stephen Treloar in Oslo. Editors: Jonas Bergman, Marianne Stigset

To contact the reporter on this story: Meera Bhatia in Oslo at mbhatia2@bloomberg.net.

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net


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