M&A Update | Food & Beverage

Q1-2018

FOOD & BEVERAGE

M&A UPDATE

PUBLICATION CONTENT PROVIDED BY BAKER TILLY CAPITAL

Major U.S. indexes The first quarter of 2018 (Q1-2018) showed negative performance for the broader U.S. equity market, as the S&P, DJIA and NASDAQ closed down 3.4 percent, 3.9 percent and 0.8 percent, respectively, for the quarter. In the LTM period ending March 29, the S&P, DJIA and NASDAQ closed up 11.5 percent, 15.4 percent and 17.6 percent, respectively. Food and beverage relative performance As of March 29, 2018, four of the five food and beverage segments exhibited decreases in market performance on a trailing 12-month basis. These decreases were largely attributable to uncertainty in public equity markets and legislative actions related to the revision of the U.S. tax code. The beverage segment performed the best of the five food and beverage segments. This segment exhibited stock gains of 3.3 percent, lagging the strong performance of the S&P 500 index’s 11.5 percent increase during the observed period.

Table 1: Food and beverage relative market performance

-20.00% -15.00% -10.00% -5.00% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00%

11.5%

-3.2% -7.1% 3.3% -0.4%

-12.6%

Mar-30-2017

Jun-30-2017

Sep-30-2017

Dec-31-2017

S&P 500 (^SPX)

Branded Packaged Goods

Natural / Organic

Beverage

Snack

Agribusiness

Table 2: Indexed market performance by sector

% Change

Median EV/ LTM

Industry Sector

3 Months 12 Months Revenue EBITDA

Branded Packaged Goods

(8.5%) (13.9%) (3.0%) (6.4%)

(12.6%) (7.1%)

2.5x 0.9x 3.8x 2.7x 1.3x

11.7x 14.2x 16.0x 14.4x 11.2x

Natural / Organic

Beverage

3.3%

Source: S&P Capital IQ and Baker Tilly Capital research (April 2018) LTM as of March 29, 2018 EV = Enterprise value

Snack

(3.2%) (0.4%)

Agribusiness

0.1%

1

Table 3: Food and beverage guideline companies

Closing Price % of 52 Enterprise

LTM

LTM Margins

EV/ LTM

Company Name (Ticker)

3/31/2018 Week High Value Revenue Gross Profit EBITDA Gross Profit EBITDA Revenue EBITDA

Branded Packaged Goods

General Mills, Inc. (NYSE:GIS)

$45.1 74.2% $36,574 $124.0 92.5% $18,844 $43.3 73.2% $16,727 $65.0 87.5% $30,882 $106.4 95.5% $18,932 $36.9 91.6% $18,306 $8.6 43.1% $1,684 $34.3 90.3% $18,672 $23.7 55.0% $3,589 $75.8 85.2% $11,013 $62.3 66.4% $106,044 $56.9 77.7% $25,570 $45.1 85.2% $18,672 $9.2 67.9% $1,476 $32.1 70.3% $3,961 $42.9 81.5% $2,582 $54.1 81.2% $9,153 $29.1 73.4% $3,477 $32.1 70.3% $2,582 $19.0 83.3% $5,416 $118.4 93.5% $25,704 $43.4 89.3% $214,191 $54.4 95.8% $29,540 $89.0 68.6% $3,989 $189.1 79.8% $2,111 $227.9 96.3% $54,532 $109.2 89.1% $174,639 $57.9 89.2% $82,525 Beverage $7.2 66.3% $214

$15,657 $7,360 $7,858 $13,076 $5,028 $7,834 $7,795 $9,219 $1,687 $5,740 $26,232 $9,771 $7,834 $1,280 $2,915 $9,696 $3,157 $3,572 $2,915 $812

$5,356 $3,199 $2,797 $1,632 $2,956 $1,954 $5,297 $3,143 $2,138 $961 $2,328 $1,394 $1,818 $326 $1,953 $1,321 $447 $315 $1,758 $1,070 $10,027 $8,315 $3,352 $2,148 $2,328 $1,394 $569 $277 $1,474 $328 $909 $660 $663 $274 $569 $277 $1,132 $276 $4,005 $1,545 $21,437 $10,908 $2,170 $1,180 $378 $212 $470 $175 $3,855 $2,779 $34,888 $12,669 $7,049 $5,064 $35,058 $21,474 $10,046 $5,118 $3,855 $1,545 $217 $42 $65 $17 $146 $63

34.2% 20.4% 2.2x 38.0% 22.2% 2.4x 37.6% 24.9% 2.0x 40.5% 24.0% 2.2x 42.5% 19.1% 3.6x 29.7% 17.8% 2.3x 23.3% 4.2% 0.2x 21.2% 14.3% 2.1x 26.5% 18.6% 2.1x 30.6% 18.6% 2.2x 38.2% 31.7% 3.7x 32.9% 19.6% 2.3x 34.2% 19.1% 2.2x 11.4% 4.9% 0.9x 19.5% 9.5% 1.2x 15.2% 3.4% 0.3x 26.8% 5.2% 0.3x 28.8% 20.9% 3.1x 20.3% 8.8% 1.2x 19.5% 5.2% 0.9x 49.4% 12.0% 1.4x 59.1% 22.8% 3.8x 63.2% 32.2% 6.1x 67.6% 36.8% 9.2x 40.0% 22.5% 4.1x 52.7% 19.6% 2.9x 50.8% 36.6% 7.0x 54.5% 19.8% 2.5x 30.0% 21.6% 3.5x 31.5% 8.1% 1.9x 62.1% 38.0% 5.3x 51.0% 24.5% 4.4x 52.7% 22.5% 3.8x 46.3% 24.8% 3.0x 39.6% 18.8% 2.8x 54.5% 19.8% 2.5x 30.0% 14.3% 2.0x 15.9% 7.9% 0.8x 37.2% 17.1% 2.2x 39.6% 18.8% 2.5x 11.4% 16.4% 1.8x 21.5% 12.0% 1.2x 3.8% 2.2% 0.4x 8.6% 3.5% 0.4x 5.7% 4.0% 0.5x 55.1% 28.5% 4.2x 12.7% 29.4% 3.9x 17.0% 13.7% 1.8x 11.4% 12.0% 1.2x

10.4x 10.7x

The J. M. Smucker Company (NYSE:SJM) Campbell Soup Company (NYSE:CPB)

8.1x 9.1x

Kellogg Company (NYSE:K)

McCormick & Company, Incorporated (NYSE:MKC) Conagra Brands, Inc. (NYSE:CAG) Dean Foods Company (NYSE:DF) Hormel Foods Corporation (NYSE:HRL) B&G Foods, Inc. (NYSE:BGS) Post Holdings, Inc. (NYSE:POST) The Kraft Heinz Company (NasdaqGS:KHC)

18.3x 11.9x 14.0x 11.1x 11.6x 11.7x 11.1x 11.1x 5.0x

Average Median

Natural / Organic

SunOpta Inc. (TSX:SOY)

18.2x 12.6x

The Hain Celestial Group, Inc. (NasdaqGS:HAIN) United Natural Foods, Inc. (NasdaqGS:UNFI) Natural Grocers by Vitamin Cottage, Inc. (NYSE:NGVC)

8.1x 4.8x

Pinnacle Foods Inc. (NYSE:PF)

15.0x 11.8x 12.6x

Average Median

Cott Corporation (TSX:BCB)

$2,294 $6,774 $33,918 $3,210

11.5x 16.9x 17.3x 25.1x 18.3x 14.9x 16.3x 12.8x 15.1x 23.6x 13.7x 16.9x 16.3x 12.1x 13.6x 12.8x 13.9x 10.5x 12.6x 12.8x

Dr Pepper Snapple Group, Inc. (NYSE:DPS) The Coca-Cola Company (NYSE:KO) Brown-Forman Corporation (NYSE:BF.B) National Beverage Corp. (NasdaqGS:FIZZ) The Boston Beer Company, Inc. (NYSE:SAM) Constellation Brands, Inc. (NYSE:STZ) Starbucks Corporation (NasdaqGS:SBUX) Craft Brew Alliance, Inc. (NasdaqGS:BREW) Anheuser-Busch InBev SA/NV (ENXTBR:ABI) PepsiCo, Inc. (NasdaqGS:PEP)

$943 $892

$7,585 $64,038 $23,465

$18.6 91.2%

$392

$207

$89.3 81.1% $267,059

$56,444

Average Median

$92.4 87.0% $78,191 $18,161

$89.0 89.2% $29,540

$6,774

Snack

The Hershey Company (NYSE:HSY)

$99.0 85.0% $23,386 $41.7 88.4% $79,527 $109.2 89.1% $174,639 $136.6 86.8% $2,421

$7,608 $26,247 $64,038 $1,143

$3,521 $1,888 $10,396 $4,945 $34,888 $12,669 $343 $164

Mondelez International, Inc. (NasdaqGS:MDLZ)

PepsiCo, Inc. (NasdaqGS:PEP)

J&J Snack Foods Corp. (NasdaqGS:JJSF) John B. Sanfilippo & Son, Inc. (NasdaqGS:JBSS)

$57.9 82.3%

$724

$879

$140

$70

Average Median

$88.9 86.3% $56,140 $19,983

$9,857 $3,947 $3,521 $1,888

$99.0 86.8% $23,386

$7,608

Agribusiness

The Mosaic Company (NYSE:MOS) Darling Ingredients Inc. (NYSE:DAR)

$24.3 83.2% $12,454 $17.3 88.7% $4,538 $73.9 88.3% $15,314 $33.1 87.0% $1,429 $43.4 93.8% $30,989 $116.7 92.0% $56,518 $37.7 83.8% $15,764

$7,409 $3,662 $45,314 $3,686 $61,366 $14,593 $4,050

$843 $1,217 $786 $439 $1,720 $997 $319 $129 $3,523 $2,467 $8,039 $4,154 $513 $1,190 $2,249 $1,513 $843 $1,190

10.9x

9.4x

Bunge Limited (NYSE:BG)

17.5x

The Andersons, Inc. (NasdaqGS:ANDE) Archer-Daniels-Midland Company (NYSE:ADM)

9.6x

11.3x 14.7x 13.1x 12.4x 11.3x

Monsanto Company (NYSE:MON) CF Industries Holdings, Inc. (NYSE:CF)

Average Median

$49.5 88.1% $19,572 $20,012

$37.7 88.3% $15,314

$7,409

Source: S&P Capital IQ and Baker Tilly Capital research (April 2018)

2

Table 4: Historical median trading multiples

Branded Packaged Goods

Average 16.4x

Average 2.4x

Average 13.2x

EV/EBIT

EV/Revenue

EV/EBITDA

25.0x

0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x

10.0x 12.0x 14.0x 16.0x 18.0x

20.0x

15.0x

0.0x 2.0x 4.0x 6.0x 8.0x

10.0x

5.0x

0.0x

2014

2015

2016

2017

LTM

2014

2015

2016

2017

LTM

2014

2015

2016

2017

LTM

Natural / Organic

Average 1.1x

Average 14.7x

EV/Revenue

EV/EBITDA

EV/EBIT

Average 19.7x

0.0x 0.2x 0.4x 0.6x 0.8x 1.0x 1.2x 1.4x

10.0x 12.0x 14.0x 16.0x 18.0x

10.0x 15.0x 20.0x 25.0x 30.0x

0.0x 2.0x 4.0x 6.0x 8.0x

0.0x 5.0x

2014

2015

2016

2017

LTM

2014

2015

2016

2017

LTM

2014

2015

2016

2017

LTM

Beverage

Average 3.5x

Average 16.2x

EV/Revenue

EV/EBITDA

EV/EBIT

Average 20.1x

0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 3.5x 4.0x

20.0x

16.0x 17.0x 18.0x 19.0x 20.0x 21.0x 22.0x 23.0x

15.0x

10.0x

5.0x

0.0x

2014

2015

2016

2017

LTM

2014

2015

2016

2017

LTM

2014

2015

2016

2017

LTM

Snack EV/EBITDA

Average 2.7x

EV/EBIT

EV/Revenue

Average 14.3x

Average 17.5x

15.5x 16.0x 16.5x 17.0x 17.5x 18.0x 18.5x 19.0x

0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 3.5x

12.5x 13.0x 13.5x 14.0x 14.5x 15.0x 15.5x

2014

2015

2016

2017

LTM

2014

2015

2016

2017

LTM

2014

2015

2016

2017

LTM

Agribusiness

Average ​1.2x

Average 10.7x

Average 24.4x

EV/Revenue

EV/EBITDA

EV/EBIT

0.0x 0.2x 0.4x 0.6x 0.8x 1.0x 1.2x 1.4x 1.6x

10.0x 12.0x 14.0x

10.0x 15.0x 20.0x 25.0x 30.0x 35.0x

0.0x 2.0x 4.0x 6.0x 8.0x

0.0x 5.0x

2014

2015

2016

2017

LTM

2014

2015

2016

2017

LTM

2014

2015

2016

2017

LTM

Source: S&P Capital IQ and Baker Tilly Capital research (April 2018)

3

M&A activity There were 62 reported M&A transactions that closed during Q1-2018, up from the 52 transactions during the fourth quarter of 2017 (Q4-2017). Reported transactions in Q1-2018 increased 6.9 percent compared to 58 deals for the same period in 2017. The aggregate deal value of the M&A transactions with reported values was $12.8 billion during Q1-2018. This is an increase from the total deal value of $5.1 billion in Q4-2017. Additionally, we would note that quarters with peak values were driven by large individual transactions that took place during each respective period.

Table 5: Quarterly U.S. food and beverage M&A activity for transactions closed Aggregate transaction value and number of deals

0 10 20 30 40 50 60 70

$70,000

57,716

$60,000

$50,000

37,214

$40,000

$30,000

25,569

23,006

21,503

17,541

$20,000

13,986

12,804

12,631

Number of Deals

6,986

$10,000

5,149

4,428

4,067

3,324

3,073 989

$0 Aggregate Transaction Value ($MM) 3.2 Median 2.0x Q2-2014 Q3-2014 Q4-2014

Q1-2015

Q2-2015

Q3-2015

Q4-2015

Q1-2016

Q2-2016

Q3-2016

Q4-2016

Q1-2017

Q2-2017

Q3-2017

Q4-2017

Q1-2018

As detailed in Tables 6 and 7, the Q4-2017 transactions with reported deal multiples 1 had a higher median revenue multiple than the historic median; also, transactions with reported EBITDA multiples had a higher median multiple than the historic median.

Table 6: Quarterly M&A TEV/revenue multiples 1

Table 7: Quarterly M&A TEV/EBITDA multiples 1

Median 15.1x

23.7

22.6

3.1

2.9

20.1

2.7

2.6

17.7 17.9

2.2

15.7

2.1 1.9

2.0 2.1 1.9

14.3 15.2

1.9

11.8 12.2

1.5

1.5 1.4

10.0

9.2

8.8

8.1

1.0

0.0

0.0

Q2-2014

Q3-2014

Q4-2014

Q1-2015

Q2-2015

Q3-2015

Q4-2015

Q1-2016

Q2-2016

Q3-2016

Q4-2016

Q1-2017

Q2-2017

Q3-2017

Q4-2017

Q1-2018

Q2-2014

Q3-2014

Q4-2014

Q1-2015

Q2-2015

Q3-2015

Q4-2015

Q1-2016

Q2-2016

Q3-2016

Q4-2016

Q1-2017

Q2-2017

Q3-2017

Q4-2017

Q1-2018

Source: S&P Capital IQ and Baker Tilly Capital research (April 2018) 1 Six revenue multiples and four EBITDA multiples reported

4

Table 8: Quarterly M&A transactions by segment

Table 9: Quarterly M&A transactions by buyer type

6.5%

15%

3.2%

11.3%

Beverage Branded Packaged Goods Agribusiness Natural / Organic Snack Private Label

32.3%

Strategic Buyer

Financial Buyer

12.9%

85%

33.9%

The branded packaged goods segment led the food and beverage industry’s M&A activity by volume, accounting for 33.9 percent of the total deals closed in Q1-2018. The beverage segment accounted for the second largest percentage of total deals for the period with 32.3 percent. The agribusiness segment followed, accounting for 12.9 percent. The snack, private label and natural/organic segments comprised the remainder of the total for the period, representing 11.3 percent, 6.5 percent and 3.2 percent, respectively. Strategic buyers were most active by volume in Q1-2018 for the food and beverage industry, representing 85 percent of all closed transactions, with financial buyers representing the remaining 15 percent. It should be noted that many of the transactions involving financial buyers consisted of financial buyers making strategic purchases through existing platform companies. U.S. middle-market food and beverage M&A activity There were eight reported middle-market 2 transactions that closed during Q1-2018, up from the seven closed middle- market transactions in Q4-2017. Reported middle-market transactions in Q1-2018 remained steady with the eight closed middle-market deals for the same period in 2017. The aggregate deal value of the middle-market M&A transactions with reported values was $610 million during Q1-2018. This is a decrease from the total deal value of $703 million in Q4-2017.

5

Table 10: Middle-market food and beverage M&A activity for transactions closed Aggregate transaction value and number of deals

$1,200

10 12 14 16

$1,000

1,025

886

$800

862

793

785

703

$600

0 2 4 6 8

625

610

475

$400

455

363

335

334 333 307 285

$200

Number of Deals

$0

Aggregate Transaction Value ($MM)

Q2-2014

Q3-2014

Q4-2014

Q1-2015

Q2-2015

Q3-2015

Q4-2015

Q1-2016

Q2-2016

Q3-2016

Q4-2016

Q1-2017

Q2-2017

Q3-2017

Q4-2017

Q1-2018

Source: S&P Capital IQ and Baker Tilly Capital research (April 2018) 2 Middle-market is defined as transaction values between $10 million and $200 million

6

Table 11: Select food and beverage transactions closed in Q1-2018

EV

EV ($MM)

Announce Date

Target

Target Business Description

Buyers/Investors

Revenue EBITDA

12/18/2017 Snyder's-Lance

Manufactures and distributes snack food products.

Campbell Soup Company

6,113.6 2.7x 21.7x

01/16/2018 U.S. Confectionary Business of Nestlé

Confectionary business of Nestle S.A.

Ferrero International

2,800.0

-

-

09/19/2017 Bob Evans Farms

Produces and distributes refrigerated and frozen food items.

Post Holdings, Inc.

1,741.3 4.2x 26.9x

12/18/2017 Amplify Snack Brands

Develops, markets, and distributes better-for-you snack products.

The Hershey Company

1,527.3 4.1x 18.5x

01/17/2018 JBS Five Rivers Cattle Feeding Provides cattle feeding services.

Ospraie Management, LLC; Pinnacle Asset Management, L.P.

200.0

-

-

11/30/2017 Field Roast Grain Meat Co.

Produces and markets vegan meat products.

Maple Leaf Foods Inc.

120.0 3.2x

-

11/07/2017 FMC Corporation, European Herbicide Portfolio

Provides solutions, applications, and products for the agricultural, consumer, and industrial markets. Owns and operates corn flour manufacturing plant and engages in the production and sale of corn flour.

Nufarm Limited

90.0

-

-

01/30/2018 Minsa Corporation

Bunge North America

75.0

-

-

Source: S&P Capital IQ and Baker Tilly Capital research (April 2018)

7

All information and analysis in this report is provided by Baker Tilly Capital, LLC, which provides investment banking services before, during, and after a sell-side or buy-side transaction. Baker Tilly Capital, member FINRA and SIPC, is a wholly- owned subsidiary of Baker Tilly Virchow Krause, LLP. RubinBrown and Baker Tilly Virchow Krause are independent members of Baker Tilly International, the world’s ninth largest network of accountancy and business advisory firms.

PRIVATE EQUITY SERVICES LEADERS

Ben Barnes, CPA, CGMA Partner-In-Charge Private Equity Services Group 314.678.3531 ben.barnes@rubinbrown.com

Tim Farquhar, CFA, CPA Partner Private Equity Services Group 314.290.3281 tim.farquhar@rubinbrown.com Jeff Barnes, CFA Manager Private Equity Services Group 314.290.3276 jeff.barnes@rubinbrown.com

Jim Mather, CPA, CGMA Partner-In-Charge Manufacturing & Distribution Services Group 314.290.3470 jim.mather@rubinbrown.com

Jeff Sackman, CPA, CGMA Partner & Vice Chair Private Equity Services Group 314.290.3406 jeff.sackman@rubinbrown.com

RubinBrown.com

1.800.678.3134

RubinBrown LLP

@RubinBrown

CHICAGO | DENVER | KANSAS CITY | LAS VEGAS | NASHVILLE | ST. LOUIS | ST. LOUIS CORTEX

This information should not be construed as a recommendation, an offer of services, or an offer to sell, or solicitation of an offer to buy a particular security or investment strategy. The reader should not rely on this information other than as authorized by a written agreement with Baker Tilly Capital, LLC. The commentaries provided are opinions of Baker Tilly Capital, LLC and are for informational purposes only. While the information is deemed reliable, Baker Tilly Capital, LLC cannot guarantee its accuracy, completeness, or suitability for any purpose and makes no warranties with regard to the results to be obtained from its use, or whether any expressed course of events will actually occur. Securities involve risk and possible loss of principal. Past performance does not guarantee future results. No compensation has been paid to person providing a testimonial. Any testimonial is not representative of the experiences of other clients and is not indicative of future performance or success. Securities, when offered, and transaction advisory services are offered through Baker Tilly Capital, LLC, Member FINRA and SIPC; Office of Supervisory Jurisdiction located at Ten Terrace Court, Madison, WI 53718; phone 800 362 7301. Baker Tilly Capital, LLC is a wholly-owned subsidiary of Baker Tilly Virchow Krause, LLP, an accounting firm. Baker Tilly Virchow Krause, LLP is an independently owned and managed Member of Baker Tilly International.