3G Capital Acquisition of Hunter Douglas
Deal Overview:
· Announcement Date: 31st December 2021
· Industry: Furnishings, Fixtures & Appliances (Consumer Cyclical)
· Deal value: $7.1bn
· Deal consideration: Undisclosed. -3G Capital and Hunter Douglas have entered a block trade agreement to acquiring a controlling 75% stake of Hunter Douglas at €175 per ordinary share (73% premium on the closing price on 30th December) through a holding vehicle.
· 3G Capital Inc Advisors: JP Morgan, Lazard, and Morgan Stanley
· Hunter Douglas N.V. Advisors: Credit Suisse
· Expected Completion: 31st March 2022
3G Capital Partners LP Details:
· Founded: 2004
· HQ: New York City, United States
· Market Cap: n/a
· EV: n/a
· LTM EBITDA: n/a
· EV/LTM EBITDA: n/a
3G Capital Partners LP is a Brazilian-American investment firm with $26.5bn AUM. The firm has a successful reputation of big debt-funded M&A deals in the food and beverage industry followed by aggressive cost cutting to maximise profits. Its most notable transaction were when it partnered up with Warren Buffet’s Berkshire Hathaway to acquire Heinz, ultimately engineering the merger between H.J Heinz’s and Kraft Foods and InBev’s acquisition of Anheuser-Busch.
Hunter Douglas N.V. Details:
· Founded: 1919
· HQ: Rotterdam, Netherlands
· Market Cap: €3.24bn
· EV: €3.23bn
· LTM EBITDA: €751.4m
· EV/LTM EBITDA: 4.30
Brief overview of company:
Hunter Douglas is a world leading manufacturer of window coverings and major manufacturer of architectural products. Hunter Douglas operates across North America, Latin America, and Asia, holding a 38% market share in the US for blinds and sales. The European (and Australian) brand is called Luxaflex ®. The company is listed on Amsterdam’s Euronext and Frankfurter Börse stock exchange with over 23,000 employees globally, and a revenue of $3.5bn.
Strategic Rationale.
This is 3G’s first major transaction since 2015, after asking investors to sit tight due to pandemic conditions and sky-high valuations whilst it searched for a suitable target they are finally making a move. Hunter Douglas sits in a relatively new market compared to previous transactions for 3G capital who specialise in large deals in the food and beverage market.
Alex Behring, Co-Founder and Co-Managing Partner, along with Daniel Schwartz, Co-Managing Partner of 3G Capital stated “we look forward to investing in Hunter Douglas to continue to strengthen its brands and further its expansion. Hunter Douglas’ strong market position is the product of its specialized expertise built over the past century.”
These comments reveal a confidence amongst the partners of the 3G Capital in both the current economic moat Hunter Douglas has held over the past century, as well as the potential for future growth and expansion.
David Sonnenberg, Hunter Douglas Group Co-CEO and Co-President, was quoted stating “As owner-operators with a long-term investment horizon and significant experience operating global branded businesses alongside founding families, 3G Capital is a dynamic steward to continue the legacy of Hunter Douglas.” This implies that the rationale behind the deal is not just to secure investment but to procure investors with a strong track history, capable of both advising the business and protecting the legacy of the Sonnenberg family for years to come.
Risks
3G Capital has obtained fully committed financing for the transaction, hence the deal is only subject to customary closing conditions, including anti-trust approvals. However, as of the announcement, there appears to be no expectation of any issues.
The deal, block trade and asset sale are expected to close in the first quarter of 2022.
References
https://uk.finance.yahoo.com/quote/HDG.AS?p=HDG.AS
https://pitchbook.com/profiles/investor/50934-61#overview
https://focusedcompounding.com/wp-content/uploads/2017/05/Hunter-Douglas-1.pdf
