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Swedish confectioners Cloetta and Leaf merge in €753m deal

By Oliver Nieburg , 16-Dec-2011

Cloetta and Leaf have sealed a €753m merger as the companies eye market leadership in the Nordic region.

Cloetta said the deal would bring together 2,800 employees and would be financed through a cash payment of €166m and the rest in company shares.

It will mean the new Cloetta starts with a net debt of €343.4m.

The company said it was aiming to become the market leader in Sweden and the Nordic region while also maintaining a presence in Italy and the Netherlands.

Cloetta said that the merged business will have combined net sales of €630m and earnings of around €73.6m.

Current Leaf CEO Bengt Baron will become the new company’s CEO while former Cloetta nomination committee member Lennart Bylock is to become chairman of the board of directors.

Baron said the merger was “the perfect match” as it would unite “brands from complementary categories with very few overlaps” giving the new company a “very strong route in the Nordic countries as well as in Italy and in the Netherlands”.

Cloetta has estimated that within two years the synergy potential as a result of deal will be in excess of €7.2m.

The new company’s brand portfolio will include Kexchoklad, Cloetta, Läkerol and Polly, which will be sold in 50 markets worldwide

The company has issued a 24-page press release that gives more in depth detail of the deal and can be found here .

Rationale for the deal

The companies said the timing of the deal was right as both had undergone restructuring in recent years.

Cloetta said that it had been adapting its operations over the past three years after a demerger with Finish firm Fazer in 2008.

Over the same period Leaf was refocusing its operations following the appointment of Baron as the company’s CEO.

Cloetta said that moving forward as a single entity would improve supply chain efficiency of both firms and give each a stronger route into the markets in the Nordic region.

Leaf is set to close its factory and Slagelese, Denmark and move production to Levice, Slovakia in the first quarter of 2012, in a move it said would save it €4.9m annually.

Cloetta said the annual cost saving for the companies would be a combined €12.1m.

Analyst's view

Euromonitor’s senior research analyst in Scandinavia Pasi Hannonen told ConfectioneryNews.com that the merger was a good opportunity for the new company to strengthen its position in its core markets following Cloetta’s previously unsuccessful merger with Fazer.

“The joint company can be deemed as a kind of failure. Although the company itself was successful, some opportunities were probably lost due to the owners of Cloetta and the Finnish Fazer family not agreeing on the ownership and direction of the company,” he said.

“Unlike with Fazer with whom Cloetta‘s product portfolio was relatively similar, the new company will combine the strengths of both Cloetta and Leaf. Cloetta is strong in chocolate confectionery while Leaf‘s strength lies in sugar confectionery and gum. The two companies complement each other very well,” Hannonen continued.

He said the potential synergy benefits and savings from the merger may lead to a lower number of production facilities.

“In the short time, this can be somewhat risky – when Leaf closed one of its production facilities in Finland a few years ago, the initial local reaction to the relocation of the production of long established Finnish brands abroad was negative,” he added.

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