British middle-market private equity firm ECI acquired a majority stake in Macclesfield-based pet food group MPM Products for £50 million.
“Since our foundation we have gone from strength to strength, and are now one of the UK’s leading natural pet food manufacturers,” said Julian Bambridge, managing director of MPM Products.
MPM creates its Applaws and Encore pet food and Nature’s Calling cat litter, from natural food that is demonstrably different, reflecting the love and care owners feel for their pets, says the company.
“At MPM, we only use ingredients that are natural in origin and that offer a health benefit. This means that we don’t use any artificial preservatives, additives or colourings. Where ever possible we create recipes with ingredients our consumers will recognise from their own food – so the meat in our tins, pots and pouches is real meat from chicken breasts or fish fillets,” says the company. MPM invests in its people, and in 2014 it was presented with Silver Level accreditation by Investors in People.
MPM was founded in 2003 by Jon Kinsey, Roger Wood and Roger Coleman, who didn’t want to feed their dogs food filled with additives and fillers.
“MPM Products is a great example of the kind of innovative, ambitious business that makes the MME sector so dynamic and I’m delighted that our new corporate banking team was able to support their plans for growth,” commented HSBC regional director of corporate banking, David Beaty. In March 2015, MPM secured £2.5m in funding from HSBC to help it enter the New Zealand and Scandinavian markets.
Spending on pets by UK consumers was estimated at £4.6bn in 2015, according to Euromonitor, a 25% increase since 2010. However, “UK pet ownership levels have remained largely flat over recent years, so what is driving this value growth? One answer is that pets are becoming increasingly pampered – or to put it another way, two long term trends are at play in the sector: the premiumisation of pet products and the humanisation of pets,” says ECI partner Chris Watt. “These trends, combined with the resilience of spend on pets through the cycle make this an exciting area in which to invest and ECI is actively seeking opportunities.”
“When compared to the US, the largest and most developed pet food market in the world, the penetration of premium or ‘natural’ pet food in the UK remains relatively low. However, market share of the premium segment continues to grow as consumers become more discerning as to what they’re feeding their pets, mirroring a healthier eating trend playing out across the wider food and drink sector. The marketing language of pet food now often resembles that of a premium ready-meal (think casseroles, fillets and hotpots) and the proliferation of functional treats, whether enriched with vitamins as dietary supplements or with breath-freshening properties, further demonstrates the converging characteristics of branded consumer and branded pet products,” added Watt.
MPM, which ships 60% of its products overseas, says it is “on track to hit £50m in sales this year” as appetite for human-grade dog and cat dishes increases. MPM is now exporting to over 46 countries worldwide, including the U.S., Asia and Europe, with a network of international offices, distributors and retailers, and is reportedly generating a 25% year-over-year sales growth rate.
Mark Keeley, a partner at ECI, said the pet food market is growing fast and met their criteria for “market-leading, well-run growth companies,” according to The Telegraph. “Pet owners are increasingly concerned about the health and well-being of their cats and dogs, which is why we believe MPM is well-placed to grow,” he said.
“The growth of our Applaws and Encore brands in international markets shows that great product can transcend cultural and geographic boundaries. We’ve seen a global shift in consumer attitudes towards their pets, with more and more owners seeking responsible sourcing and quality food,” added Bambridge.
Rival bidders for MPM included Belgium-based venture capital firm Verlinvest, set up by the de Mevius and de Spoelberch families, whose forefathers founded parts of the world’s largest brewer, Anheuser-Busch InBev, maker of Budweiser. Another bidder was Mayfair Equity Partners, which was set up by former Lloyds Development Capital executive Daniel Sasaki, said the Sunday Times.
MPM was represented by PwC in the bidding process and the transaction. PwC had been brought in to explore a sale of the company since late 2013. ECI was advised by KPMG.
ECI is one of the most successful private equity groups in the UK. The firm specializes in investing in high growth companies valued between £20m and £150m. ECI has invested in more than 250 companies helping to build many successful businesses, including Café Rouge, Chubb, Racal Acoustics, Bloomsbury Publishing, Laterooms, National Computing Centre, National Express and CarTrawler. The firm invests in management buyouts, buyins and acquisition finance deals of growth companies across its key sectors and is comfortable taking majority or minority equity positions. The firm raised its largest fund to date in the Summer of 2014, ECI 10 at £500m. ECI was founded in 1976, and is based in London and Manchester, United Kingdom.