Despite signaling its retreat from farmland investing in 2017, the Canada Pension Plan Investment Board (CPPIB) has not retreated from food, investing C$200 million (US$148.9 million) for a 7.1 percent stake in specialty food company Premium Brands Holdings Corp.
Founded in 1917 and headquartered in Richmond, British Columbia, Premium Brands controls a range of specialty food manufacturing and distribution businesses with operations across the U.S. and Canada. All told the company has more than 40 brands of meat and seafood, and supplies breakfast sandwiches to Starbucks, as well as being a supplier to Boston Pizza, and Keg. The company is also gearing up for June 1, when a new partnership with Walmart that will see it expand its breakfast offering sales take effect.
The deal is being entered into as a long-term strategic partnership, supported by CPPIB’s strong track record of realizing long-term value creation both in Canada and abroad. With its minority stake in the company, CPPIB will gain representation on the company’s Board, giving the pension fund direct exposure to anticipated shifts in the consumer market that are expected to see preferences lean toward more premium meats, and the purchasing of breakfast sandwiches and prepared foods on-the-go.
“We are very pleased to be entering into this long-term partnership with CPPIB as we embark on the next stage of our growth strategy,” said George Paleologou, president and CEO of Premium Brands.
“As we have expanded our footprint across North America our pipeline of acquisition and organic growth opportunities has scaled dramatically. By partnering with CPPIB not only do we better position ourselves to execute on these opportunities but we also secure a long-term focused shareholder who shares our values and vision for the future.”
Beginning in 2015, Premium Brands’ stock began to skyrocket, driven by strong sales of Starbucks breakfast sandwiches, quadrupling in value to reach highs of $121.41 by mid-2018. However, in the months since, certain factors such as input overhead and operational challenges have seen the stock fall back to $76.02, giving CPPIB a discounted entry.
“Premium Brands’ strong track record of value creation, combined with its opportunities to expand its portfolio in Canada and the U.S., make this a compelling investment for CPPIB,” said Deborah Orida, senior managing director and global head of Active Equities, CPPIB. “This investment builds on our Relationship Investments group’s strategy to provide strategic, long-term capital to leading public companies where we can help create greater value through ongoing partnership.”
Premium Brands said that it will use the capital proceeds from the deal to repay debt, finance organic and acquisition opportunities, and for general corporate purposes. Based on the company’s unutilized credit capacity as of March 30, 2019, the capital gained, and a concurrent funding deal for another C$60 million (US$44.65 million) through subscription agreements with certain shareholders of the company, Premium Brands should have approximately C$416 million (US$310 million) of liquidity for its intended purposes.
Company President and CEO George Paleologou added about the deal, “Furthermore, we gain access to the insights of a leading global investor, which will become increasingly important as we start to look beyond North America.”
-Lynda Kiernan