PE: Convergent, Samara Capital to acquire 51.8% in Agro Tech Foods

Transaction:

• Convergent Finance LLP and private equity firm Samara Capital will jointly acquire a 51.8% stake in Agro Tech Foods Limited from Conagra Brands, Inc. The brands will pay around Rs 650 Crores to its US Based parent Conagra Brands Inc.
• The funds have kept another Rs 360 Crores for the additional 26% of the outstanding shares through mandatory open offer.

About Agro Tech Foods Limited (ATFL):

• ATFL is a public Limited company that owns a wide range of Food Products brands including ACT II popcorn and Edible Oil Sundrop.
• Other food categories in which the Company competes includes Ready to Cook Snacks, Ready to Eat snacks, Spreads & Dips, Breakfast Cereals and Chocolate Confectionery. 
• ATFL was promoted by Chicago, US Based Conagra brands, which was owning 51.8% controlling stake of the company.

About Investors:

Convergent Finance LLP:

• Convergent Finance LLP is a private equity fund led by Mr. Harsha Raghvan with investments including Hindustan foods ltd., ADF foods, Camlin fine sciences amongst others.

Samara Capital:

• Founded in 2007, Samara Capital is an Indian mid-market private equity firm with focus on consumer retail, healthcare and financial services. It’s investments include More retail, Nature’s essence and blue heaven, Marengo Asia amongst others.

Rationale:

• Conagra became a controlling shareholder of ATFL in 2011, after which ATFL accelerated the growth of its food portfolio, including ACT II popcorn and Sundrop edible oils. Both these brands are leaders in their respective categories, and offer a basket of products for both in-home and out-of-home consumption.
• ATFL will continue to license the ACT II brand from Conagra for use in India.
• Samara capital and Convergent are setting up a platform for packaged foods which will explore acquisitions in mid sized packaged food companies. This platform will be similar to Sapphire foods which Samara capital had set up for food services business with investment in restaurant chains KFC and Pizza Hut. Samara is also part of pharma API platform Sekhmet pharmaventures.

• “As India’s rapidly-growing consumer class expands and discretionary income levels continue to rise, we will expand ATFL’s distribution reach and product range, thereby transforming it into the country’s leading packaged and snack food platform,” said Harsha Raghavan, Managing Partner at Convergent Finance.
• “We are delighted to lead the acquisition of a majority stake in ATFL. We intend to create a large and unique branded food platform in the country with this acquisition,” said Manish Mehta, Managing Director of Samara Capital.
• The promoter, Conagra will sell its controlling stake of 51.8% at a price of Rs 515 apiece. However, the mandatory open offer of 26% to the public shareholders is at Rs 578 apiece, which is still at a discount of 17% to the average price of the stock in past one year. The stock prices saw heavy volatility on announcement of deal and jumped to over Rs. 1000, before falling to around Rs. 712 in a week after the deal.