NOMD.L - Nomad Holdings Limited

[Phaceliacapital]

Very good, thanks!

[giofranchi]

Nomad Foods Ltd. (NHL)

Nomad is a Special Purpose Acquisition Company (“SPAC”) sponsored by Martin Franklin and Noam

Gottesman. The SPAC originally raised $500 million in the spring of 2014. In the spring of 2015, Martin

approached us with an opportunity to become an anchor shareholder in Nomad. At that time, Nomad was

contemplating a $2.8 billion acquisition of Iglo Group. Given the size of the acquisition, it needed to raise

substantial additional equity.

We have known Martin for many years, and his impressive track record of creating value for

shareholders, including his extremely successful stewardship of Benson Eye Care and Jarden

Corporation where he has generated, as of July 31, 2015, a greater than 48-fold gain for shareholders.

We highlighted his success in our May 2015 Ira Sohn presentation.

In 2011, we partnered with Martin and Nicholas Berggruen in Justice Holdings, Ltd., a SPAC that

eventually merged with 3G’s Burger King Worldwide, which is now known as Restaurant Brands

International since the 2014 acquisition of Tim Hortons.

After conducting diligence on Iglo Group, we invested $350 million in a private placement of Nomad’s

common stock contemporaneous with its acquisition of Iglo on June 1, 2015, giving us a 22% ownership

stake in the company across Pershing Square funds. Brian Welch, a member of our investment team,

joined Nomad’s board of directors. We believe that Iglo is a great anchor investment that will allow

Nomad to create value for shareholders over time as a consolidator in the packaged food industry.

Iglo is the leading branded frozen food business in Europe with €1.5 billion in sales. It is a stable, high

margin (20% EBITDA margin), free-cash-flow-generative business. It has a leading share in European

frozen foods at 2.2 times the size of the next largest competitor, with strong brand equity. Historical

growth in the business has been flat, but management sees opportunities for organic growth by

expanding the company’s great brand names into adjacent frozen food categories.

Nomad’s purchase of Iglo was completed at an attractive valuation. The $2.8 billion purchase price

equated to 8.5 times 2014 EBITDA. Given the low capex requirements of the business (less than 2% of

sales) and its modest cash tax rate (21%), the purchase price equated to 12 times unlevered free cash

flow. By financing the acquisition with leverage of four times Debt / EBITDA, at our $10.50 purchase

price, we paid approximately eight times levered free cash flow. The market quickly recognized the

attractiveness of the transaction, causing the stock price to double after the transaction was announced.

Nomad intends to use Iglo as a platform for future food industry acquisitions. The first such acquisition

was announced on August 13th, with Nomad agreeing to purchase Findus Group's Continental European

Businesses for £500 million. These frozen food assets were purchased at an attractive valuation and are

highly complementary as they fill out Iglo's existing European footprint.

The packaged food industry is large and fragmented and is currently undergoing significant change with

the presence of 3G and many activist investors. We believe that the Nomad team, led by co-chairmen

Martin Franklin and Noam Gottesman, and new CEO Stefan Descheemaeker (formerly of grocer Delhaize

Group and ABInBev), has the experience and skills to make Nomad a very successful long-term

investment.

--PSH 2015 semi-annual report

 

 

Gio

[giofranchi]

Q2 2015 results are out:

 

http://otp.investis.com/clients/uk/nomad_holdings/rns/regulatory-story.aspx?cid=1103&newsid=563481

 

Revenues are still declining… Mmm… Despite Ackman’s upbeat view on this investment, I think I am watching from the sidelines for a while…

If I see organic growth in the next quarters, I might be buying it back.

 

Cheers,

 

Gio

 

[Liberty]

·      €536m loss after tax in six months to 30 June 2015 primarily resulting from a non-cash founder shares valuation charge (€493m), purchase accounting adjustments (€26m) and costs associated with the acquisition of the Iglo Group (€22m).

 

Those founder's shares are a killer, eh?

[giofranchi]

·      €536m loss after tax in six months to 30 June 2015 primarily resulting from a non-cash founder shares valuation charge (€493m), purchase accounting adjustments (€26m) and costs associated with the acquisition of the Iglo Group (€22m).

 

Those founder's shares are a killer, eh?

 

Well, those were to be expected, weren't they? And you already know my view on them.

 

What bothers me instead is the lack of growth... JAH has always grown organically, NHL isn't... It might be too early to judge, but I don't like waiting for a turnaround... Especially because there are other companies which are growing organically, and because I could always get back in when organic growth should materialize.

 

Cheers,

 

Gio

[CorpRaider]

I'm reading "Billionaire" Sir James Goldsmith's biography and it is interesting how Martin Franklin's dad, Roland, worked with Sir James and it seems like the playbook has been handed down.  Also some interesting discussion of Al "Chainsaw" Dunlap who Goldsmith brought into the fold after he worked some magic for KKR on a deal.  I think the book is out of print, but it is a decent read.

[Aman1]

Is anyone still following this? Giofranco?

 

Wondering how attractive it looks here - particularly as the prior $22 high now shelters you from getting screwed for the next 100%+ from here from the founders shares. Re-rated to a single digit multiple, cost cutting alone and flat top line might be enough to slowly drive a re-rating.

 

I'm not involved, probably #5 on my to-do list (so probably a couple months away due to my current work load) so thought I'd ask for early feedback

 

I was just looking at the 2015 company presentation and while I get consolidating frozen food, it's odd that they are prepared to go after non-frozen packaged goods. Not entirely clear what a small frozen food operator brings to the ambient packaged goods space that a load of larger companies aren't arleady doing. Also, if this is a future acquirer, the danger is they structure future deals with partial equity packages that further screw minorities.