OTPP Sells Shearer's Foods and Acquires Stake in Mahindra Susten
Private investment firm Clayton Dubilier & Rice has announced that it has entered into a definitive agreement for funds it manages to acquire Shearer’s Foods, a contract manufacturer and private label supplier serving the snack industry in the U.S. and Canada, from Ontario Teachers’ Pension Plan Board. Terms of the transaction were not disclosed. As part of the transaction, Ontario Teachers’ (Shearer’s existing majority shareholder), will exit its position in the company.
Founded in the early 1900s, Shearer’s is an award-winning supplier to large, well-known retailers and consumer-branded companies. The company has an expansive manufacturing footprint and diversified offering that has enabled it to become a leading manufacturer of salty snacks cookies and crackers products. Based in Massillon, OH, the company is led by executive chairman Bill Nictakis and CEO Mark McNeil.
“CD&R shares our focus and commitment, and their track record of helping build stronger, more sustainable businesses makes the firm an ideal partner as we continue to drive our business forward,” says Nictakis. “At the same time, I would like to express my gratitude to the Ontario Teachers’ team. Under their more than a decade of ownership, we have successfully grown our footprint and significantly diversified our offerings to our valued customers.”
Echoing Mr. Nictakis’ sentiments, McNeil adds, “As Shearer’s enters a new phase of growth, we are excited to be joined by a team with the experience, expertise, and resources to support our mission of producing high-quality, innovative, and delicious snacks that we are proud to serve to our families, friends, customers and retailers.”
“We have deep admiration and respect for Shearer’s, a leading business that shares our core values in a sector and operating model we know and understand well,” said John Compton, CD&R operating partner, and former president of PepsiCo and CEO of PepsiCo North America, including the Frito-Lay, Quaker, and Pepsi beverage divisions. “We are thrilled to be partnering with Bill and Mark to build on Shearer’s history of success in serving great-tasting snacks.”
“We have strong conviction in the differentiated manufacturing capabilities and category management the Company provides, and our goal is to support the team in further scaling operations and capturing the many opportunities ahead to better serve Shearer’s customers,” adds J.L. Zrebiec, CD&R Partner.
Ontario Teachers’ initially invested in Shearer’s in 2012 and became a significant majority owner in 2015. The company has grown from five plants to 17 and has become one of the largest producers of private-label and co-manufactured salty snacks in North America. During this time, Shearer’s has also invested in its plant network to strengthen its relationships with strategic blue-chip customers, while also diversifying its geographic and product mix.
“Over the past decade, we have been proud to partner with the Shearer’s management team as it established itself as a market leader in North America for private label and contract manufactured salty snacks, cookies, and crackers. Shearer’s has achieved this position by consistently delivering high-quality and innovative products while expanding its market presence,” says Raymond Shiu, managing director of private capital at Ontario Teachers’.
“With the investments Ontario Teachers’ has made into Shearer’s over the past decade, we are excited to see the Company reach new heights in the future. We wish CD&R, Bill, Mark, and everyone at Shearer’s continued success in the Company’s next stage of growth,” says Harj Shoan, senior managing director of private capital at Ontario Teachers’.
Deutsche Bank Securities Inc., UBS Investment Bank, BMO Capital Markets Corp, BNP Paribas, RBC Capital Markets LLC, and TD Securities provided financing and served as financial advisors to CD&R. Blue Owl Capital Inc. and Goldman Sachs Bank USA provided financing to CD&R. Debevoise & Plimpton LLP served as legal advisor to CD&R. Goldman Sachs & Co. LLC served as exclusive financial advisor and Kirkland & Ellis served as legal advisor to Shearer’s.
On Wednesday, Ontario Teachers' Pension Plan issued a press release stating private equity firm Clayton Dubilier & Rice is acquiring Shearer’s Foods:
New York, NY / TORONTO, CANADA – December 13, 2023 – Clayton Dubilier & Rice (“CD&R” or the “Firm”) today announced that it has entered into a definitive agreement for funds it manages to acquire Shearer’s Foods (“Shearer’s” or the “Company”), a leading contract manufacturer and private label supplier serving the snack industry in the United States and Canada, from Ontario Teachers’ Pension Plan Board (“Ontario Teachers’”). Terms of the transaction were not disclosed. As part of the transaction, Ontario Teachers’, Shearer’s existing majority shareholder, will exit its position in the Company.
Founded in the early 1900s, Shearer’s today is an award-winning supplier to some of the largest and most well-known retailers and consumer branded companies. The Company has an expansive manufacturing footprint and diversified offering that has enabled it to become a leading manufacturer of salty snacks and cookies and crackers products. Based in Massillon, Ohio, the Company is led by Executive Chairman Bill Nictakis and CEO Mark McNeil.
“CD&R shares our focus and commitment, and their track record of helping build stronger, more sustainable businesses makes the firm an ideal partner as we continue to drive our business forward,” said Mr. Nictakis. “At the same time, I would like to express my gratitude to the Ontario Teachers’ team. Under their more than a decade of ownership, we have successfully grown our footprint and significantly diversified our offerings to our valued customers.”
Echoing Mr. Nictakis’ sentiments, Mr. McNeil added, “As Shearer’s enters a new phase of growth, we are excited to be joined by a team with the experience, expertise and resources to support our mission of producing high-quality, innovative and delicious snacks that we are proud to serve to our families, friends, customers and retailers.”
“We have deep admiration and respect for Shearer’s, a leading business that shares our core values in a sector and operating model we know and understand well,” said John Compton, CD&R Operating Partner and former President of PepsiCo and CEO of PepsiCo North America, including the Frito-Lay, Quaker and Pepsi beverage divisions. “We are thrilled to be partnering with Bill and Mark to build on Shearer’s history of success in serving great-tasting snacks.”
“We have strong conviction in the differentiated manufacturing capabilities and category management the Company provides, and our goal is to support the team in further scaling operations and capturing the many opportunities ahead to better serve Shearer’s customers,” said J.L. Zrebiec, CD&R Partner.
Ontario Teachers’ initially invested in Shearer’s in 2012 and became a significant majority owner in 2015. The Company has grown from five plants to 17 and has become one of the largest producers of private label and co-manufactured salty snacks in North America. In this time, Shearer’s has also invested in its plant network to strengthen its relationships with strategic blue-chip customers, while also diversifying its geographic and product mix.
“Over the past decade, we have been proud to partner with the Shearer’s management team as it established itself as a market leader in North America for private label and contract manufactured salty snacks, cookies and crackers. Shearer’s has achieved this position by consistently delivering high-quality and innovative products, while expanding its market presence,” said Raymond Shiu, Managing Director, Private Capital at Ontario Teachers’.
“With the investments Ontario Teachers’ has made into Shearer’s over the past decade, we are excited to see the Company reach new heights in the future. We wish CD&R, Bill, Mark, and everyone at Shearer’s continued success in the Company’s next stage of growth,” said Harj Shoan, Senior Managing Director, Private Capital at Ontario Teachers’.
Deutsche Bank Securities Inc., UBS Investment Bank, BMO Capital Markets Corp, BNP Paribas, RBC Capital Markets LLC and TD Securities provided financing and served as financial advisors to CD&R. Blue Owl Capital Inc. and Goldman Sachs Bank USA provided financing to CD&R. Debevoise & Plimpton LLP served as legal advisor to CD&R. Goldman Sachs & Co. LLC served as exclusive financial advisor and Kirkland & Ellis served as legal advisor to Shearer’s.
Learn more about how Ontario Teachers’ supported Shearer’s growth.
About Clayton, Dubilier & Rice
Founded in 1978, Clayton, Dubilier & Rice (CD&R) is a leading private investment firm with a strategy of generating strong investment returns by building stronger and more sustainable businesses through the combination of skilled investment experience and deep operating capabilities. In partnership with the management teams of its portfolio companies, CD&R takes a long-term view of value creation and emphasizes positive stewardship and impact. The firm invests in businesses that span a broad range of industries, including industrial, healthcare, consumer, technology and financial services end markets. CD&R is privately owned by its partners and has offices in New York and London. For more information, please visit www.cdr-inc.com and follow the firm’s activities through LinkedIn and @CDRBuilds on X/Twitter.
About Shearer’s Foods
Shearer's is a leading contract manufacturer and private label supplier in the snack industry in North America. Headquartered in Massillon, Ohio, Shearer's has 17 state-of-the-art, geographically diverse manufacturing facilities in Ohio, Texas, Arkansas, Arizona, Florida, Minnesota, Pennsylvania, Oregon, Virginia, Iowa, Ontario and Alberta including one of the industry's first Leadership in Energy and Environmental Design platinum LEED certified facilities in Massillon, Ohio. The Company is known for producing the highest quality snacks in assorted flavors and sizes, including kettle cooked potato chips, traditional potato chips, tortilla chips, cheese curls and other extruded snacks, and corn chips, as well as cookies, crackers, and wafers.
About Ontario Teachers'
Ontario Teachers' Pension Plan Board (Ontario Teachers') is a global investor with net assets of C$249.8 billion as at June 30, 2023. We invest in more than 50 countries in a broad array of assets including public and private equities, fixed income, credit, commodities, natural resources, infrastructure, real estate and venture growth to deliver retirement income for 336,000 working members and pensioners.
With offices in Toronto, London, Hong Kong, Singapore, Mumbai and San Francisco, our more than 400 investment professionals bring deep expertise in a broad range of sectors and industries. We are a fully funded defined benefit pension plan and have earned an annual total-fund net return of 9.4% since the plan's founding in 1990. At Ontario Teachers', we don't just invest to make a return, we invest to shape a better future for the teachers we serve, the businesses we back, and the world we live in. For more information, visit otpp.com and follow us on LinkedIn.
As noted in the statement, Ontario Teachers’ initially invested in Shearer’s in 2012 and became a significant majority owner in 2015:
The Ontario Teachers' Pension Plan (Teachers') today announced the acquisition of an additional equity stake in Shearer's Snacks (Shearer's) from Wind Point Partners (Wind Point). With this transaction, Teachers' holds a significant majority ownership in Shearer's, with company management remaining a meaningful shareholder. Wind Point retains a small interest in Shearer's.
Teachers' Private Capital (TPC), the private equity group of Teachers', acquired its initial stake in Shearer's in 2012 alongside Wind Point and in partnership with CJ Fraleigh, who joined as Chairman and CEO. Mr. Fraleigh has 25 years of experience in consumer products and most recently served as CEO of Sara Lee - North America.
During Teachers' and Wind Point's ownership, Shearer's completed the acquisitions of Lance Private Brands and Medallion Foods, doubling the size of the business and significantly expanding the private label and contract manufacturing product offerings.
"We have created significant value over the past two years deepening Shearer's longstanding relationships with branded companies and retailers by broadening our scope, both through internal initiatives designed to help our customers grow and by expanding our national manufacturing footprint and diversifying our product offerings," commented Mr. Fraleigh. "We are proud of the transformation accomplished while partnering with Wind Point and Teachers', and we believe this transaction has long-term positive implications for our customers and associates."
"Teachers' welcomes the opportunity to build on our relationship with Shearer's," said Jane Rowe, Senior Vice-President of TPC. "The company's strong management team has demonstrated its ability to grow organically and through acquisitions in a sector that continues to have attractive prospects."
Mark Burgett, a managing director at Wind Point stated, "The Shearer's story is an example of how Wind Point's strategy to partner with a top calibre CEO such as CJ can transform a business. CJ and the entire Shearer's team did an excellent job executing on our value creation plan, by increasing Shearer's category management and manufacturing capabilities to help its customers grow, improving productivity and completing add-on acquisitions."
So, OTPP co-invested in Shearer’s Foods back in 2012 alongside Wind Point and in partnership with CJ Fraleigh, and three years later it acquired a significant majority ownership and held this investment for eight years after, growing the company from five plants to 17 to become one of the largest producers of private label and co-manufactured salty snacks in North America.
Shearer’s is known for its products, especially its salty snacks:
Shearer’s is the largest supplier of private brand salty snacks and the second-largest supplier of private brand cookies and crackers in North America. We work hard to produce delicious snacks that we would be proud to serve to our friends and families.
Shearer’s follows world-class quality and safety standards, and our facilities are certified under Global Food Safety Initiatives (GFSI) certified scheme – SQF Food Safety and Quality modules.
We’re constantly challenging ourselves to be more mindful of the raw materials we use, the way we manufacture the products we sell, and the people we encounter along the way. We aim to provide great-tasting snacks that make us all feel good, while strengthening our industry and our community through sustainable manufacturing.
Back in August, Reuters reported Teachers' was exploring the sale of Shearer's Foods that could value the biggest maker of salty snacks in North America at more than $3 billion, including debt, according to people familiar with the matter.
That cash out will boost the performance of Teachers' Private Capital this year or next year depending on if the deal closes before year-end.
I'm expecting more dispositions like this at Canada's Maple 8 to help with the lagging performance of private equity in a tough environment.
In other related news, on Thursday, India's Business Standard reported Ontario Teachers' will acquire 30% stake in Mahindra Susten for Rs 2,371 cr:
Mahindra Group on Thursday announced that it has tied up with Ontario Teachers' Pension Plan Board to capitalise on renewables in India. Under the agreement, Ontario Teachers' will acquire a 30 per cent stake in Mahindra Susten Pvt Lts for Rs 2,371 crore. Then, Mahindra Group and Ontario Teachers' will jointly explore the sale of an additional 9.99 per cent in Mahindra Susten.
Under the agreement, the companies will also establish an Infrastructure Investment Trust (InvIT) comprising renewable power assets of Mahindra Susten with an operation capacity of 1.54 GWp.Moreover, with the proceedings of the stake sale, Mahindra Susten will repay Rs 575 crore worth of loans to Mahindra Group.The transaction will enable Mahindra Sustain to build a renewable energy business focused on solar energy, hybrid energy, integrated energy storage and round-the-clock green energy plants."As part of our climate change strategy, we have committed to continue growing our portfolio of green assets around the globe with investments like Mahindra Susten," Bruce Crana, senior managing director, Asia Pacific (Investment and Natural Resources) at Ontario Teachers'.Under the United Nations Framework Convention on Climate Change, India has committed to reducing the emissions intensity of its gross domestic product (GDP) by 45 per cent by 2030 from its 2005 levels.Moreover, it has also committed to producing 50 per cent of its power from non-fossil fuels by 2030."The partnership with Ontario will enable the Mahindra Group to unlock value in the renewable energy sector with continued joint investments towards accelerated growth," added Puneet Ranjhen, member of group executive board and executive vice-president at Mahindra Group.
This is a roughly US$257M investment in Mahindra Susten.
This deal was largely anticipated as in September 2022, Ontario Teachers and Mahindra Group announced they were forming a strategic partnership in the renewable energy space with plans to acquire a large minority stake in Mahindra Susten:
Mumbai, September 17, 2022: Mahindra Group and Ontario Teachers’ Pension Plan Board (“Ontario Teachers’”) announced today a strategic partnership to capitalize on the growing renewables opportunity in India and contribute towards the country’s decarbonization ambitions. The parties have signed binding agreements pursuant to which Ontario Teachers’ will acquire a 30% equity stake in Mahindra Susten Private Limited (“Mahindra Susten”) at an equity value of INR 2,371 crore (~USD 300 million).
The proposed transaction also envisages the setting up of an Infrastructure Investment Trust (“InvIT”) in compliance with applicable regulations of the Securities and Exchange Board of India. The InvIT is initially proposed to comprise renewable power assets seeded by Mahindra Susten with operational capacity of around 1.54 GWp. As part of the proposed transaction, shareholder loans of INR 575 crore (~USD 73 million) advanced by Mahindra Group to Mahindra Susten will be repaid.
As a result of this transaction, Mahindra Group will receive an inflow of approximately INR 1,300 crore (~USD 165 million). Mahindra Group and Ontario Teachers’ will jointly explore the sale of an additional 9.99% stake in Mahindra Susten by May 31, 2023. Mahindra Group will deploy these funds, plus an incremental amount of up to INR 1,750 crore (~USD 220 million), into the business and InvIT over the next seven years.
Over the same period, Ontario Teachers’ has committed to deploy an additional amount of up to INR 3,550 crore (~USD 450 million) into the business and the InvIT.
This transaction will enable Mahindra Susten to build a strong renewable energy business focused on solar energy, hybrid energy, integrated energy storage and round-the-clock (“RTC”) green energy plants.
Puneet Renjhen, Member of Group Executive Board and EVP, Partnerships & Alliances at the Mahindra Group said: “We are delighted to welcome Ontario Teachers’ as a strategic partner in Mahindra Susten. The partnership with Ontario Teachers’ will enable the Mahindra Group to unlock value in the renewable energy sector with continued joint investments towards accelerated growth. The Mahindra Group aims to be Planet Positive by 2040 and the continued inflow of patient, long-term capital in our climate positive businesses is validation of our commitment to be a global ESG leader.”
Bruce Crane, Senior Managing Director, Asia Pacific, Infrastructure & Natural Resources at Ontario Teachers’ said: “We are pleased to continue making significant investments in India and to acquire a meaningful stake in Mahindra Susten, one of India’s leading renewable energy platforms. As part of our climate change strategy, we have committed to continue growing our portfolio of green assets around the globe with investments like Mahindra Susten. This strategic partnership marks the beginning of what we hope will be a long-term and mutually beneficial relationship with the Mahindra Group.”
Deepak Thakur, Managing Director & Chief Executive Officer, Mahindra Susten said: “This partnership with Ontario Teachers’ syncs with Mahindra Susten’s plan to substantially grow our green energy portfolio across solar PV, wind, and energy storage. This platform will leverage our proven experience in development and deep knowledge of the Indian energy market. Our in-house EPC capabilities honed across renewable energy projects executed globally ensure Mahindra Susten engineers and delivers superior performing assets, thereby enabling our energy platform to provide clean, reliable power to millions of people across India.”
Chris Ireland, Senior Managing Director, Greenfield Investments & Renewables, Infrastructure & Natural Resources at Ontario Teachers’ said: “We are proud to invest in one of India's leading renewable energy platforms. We believe the renewable energy sector in India is poised for significant growth in the coming years as India works towards its ambitious clean energy goals, and are excited to partner with the Mahindra Group in this initiative.”
As per the updated Nationally Determined Contributions (“NDCs”) of the United Nations Framework Convention on Climate Change (“UNFCCC”), India now stands committed to reducing the emissions intensity of its GDP by 45% by 2030 from its 2005 levels, and achieve about 50% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030. These are concrete steps towards achieving India’s long-term goal of reaching net-zero by 2070. As a result, the Indian renewable industry is expected to continue to grow significantly in the long term.
It is expected that Ontario Teachers’ acquisition of a 30% shareholding in Mahindra Susten, which is subject to closing conditions including regulatory approvals, will complete over the next few months. The InvIT is also expected to be formed during FY 2024 subject to requisite approvals.
Avendus Capital acted as financial advisor and Khaitan & Co. acted as legal advisor to the Mahindra Group for the transaction. Ambit acted as financial advisor and Cyril Amarchand Mangaldas acted as legal advisor to Ontario Teachers’ for the transaction.
About Mahindra Group
Founded in 1945, the Mahindra Group is one of the largest and most admired multinational federation of companies with 260,000 employees in over 100 countries. It enjoys a leadership positioning farm equipment, utility vehicles, information technology and financial services in India and is the world’s largest tractor company by volume. It has a strong presence in renewable energy, agriculture, logistics, hospitality and real estate.
The Mahindra Group has a clear focus on leading ESG globally, enabling rural prosperity and enhancing urban living, with a goal to drive positive change in the lives of communities and stakeholders to enable them to Rise.
Learn more about Mahindra on www.mahindra.com / Twitter and Facebook: @MahindraRise/ For updates subscribe to https://www.mahindra.com/newsroom
About Mahindra Susten
Mahindra Susten is Mahindra Group’s renewable energy platform, which includes one of the leading renewable engineering, procurement and construction (“EPC”) businesses (capacity constructed of over 4 GWp), an independent power producer (“IPP”) business with around 1.54 GWp of operational solar plants spread across several states in India, and plan to have a significant solar development pipeline. The IPP solar portfolio is spread across 5 key states in India and is backed by long-term power purchase agreements – approximately 75% of assets are backed by central government entities and the remaining with distribution companies backed by state governments. Besides its own in-house management team with extensive capabilities across both EPC and IPP domains, Mahindra Susten also benefits from solar plant operations and maintenance services and other technical expertise of Mahindra Teqo Private Limited. For more information, visit https://www.mahindrasusten.com
As Bruce Crane, now Executive Managing Director, Asia-Pacific at Ontario Teachers' stated back then, they hope will be a long-term and mutually beneficial relationship with the Mahindra Group.
It sure looks that way.
Alright, let me wrap it up there.
Below, Pam Kaufman, equity research analyst at Morgan Stanley, joins 'Power Lunch' to discuss the impact of weight loss drugs on the food and beverage industry.
Ms. Kaufman thinks snack companies could face a headwind from the exponential growth in weight loss drugs like Mountjaro and Ozempic.
Notice she says people on these drugs have a significant reduction in cravings for sweets and fast food snacks.
Not sure if this factored into OTPP's decision to sell Shearer's Food but I doubt it, just like I doubt these weight loss miracle drugs will put snack food manufacturers out of business.
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