TPG gets clucky: Bob Ingham scores $880 million for Inghams

Private equity firm TPG Capital has acquired Australia’s biggest poultry producer Ingham Enterprises in an $880 million deal, officially bringing an end to over 95 years of ownership by the Ingham family.

Seven banks have agreed to finance TPG’s purchase.

TPG beat private equity rival Blackstone Group, Affinity and Chinese agribusiness company New Hope to secure the deal. The deal is said to have valued Inghams at $1 billion.

Bob Ingham, now in his early 80s, put the iconic chicken company on the market in July last year, but his family will retain a substantial property portfolio and a small horse racing business.

“An important part of the decision for me was finding a buyer who would ensure that our customers will continue to receive the highest level of service and our employees would be well looked after. I believe I have found that in TPG,” Ingham said in a statement.

TPG is best known in Australia for its ownership and float of department store Myer.

A statement by Inghams says the day-to-day operations of the company will continue as normal, under the leadership of chief executive Kevin McBain.

TPG managing partner Ben Gray said in a statement he will continue to support McBain.

“TPG is privileged to be buying a great Australian business from a great Australian businessman. We look forward to continuing to grow, innovate with and serve the strong and loyal customer base and back the team lead by Kevin McBain,” Gray says.

In the 2013 financial year, Inghams is forecast to post $210 million in earnings before interest, tax, depreciation and amortisation.

According to IBISWorld research, about 95% of all chicken meat in the country is produced by a handful of privately owned processors such as Inghams and Baiada.

Baiada and Inghams together dominate 70% of the chicken market.

IBISWorld reported last year chicken has emerged as Australian’s favourite meat, with industry revenue expected to increase by 2.4% over the next five years to total $7.48 billion.

In recent years there has been a consolidation of the poultry industry in Australia. In 2011, just a year before Inghams was put up for sale, the company acquired Byron Bay-based Sunnybrand Chickens. In July 2009, Baiada acquired Bartter Holdings and as a result of this acquisition, Baiada followed Inghams as the industry’s second-largest operator, an IBISWorld report says.

“Increased concentration within the processing sector has effectively diminished the negotiating power of poultry farmers when entering into supply contracts with processors.

“As a result, the number of establishments is expected to contract over the five years through 2012-13,” the report says.

SmartCompany contacted TPG Capital, but it would not comment further.

The Australian Financial Review reports TPG will continue with Ingham’s strategy of trying to sell higher margin products like free range chickens, which currently only comprise 10% of sales, in an attempt to reduce the share of sales from commoditised products.

Inghams group services director John Hexton told SmartCompany Inghams will continue to focus on “areas of growth”.

“The company’s strategy will be to continue to focus on areas of growth to meet the requirements of its customers and the market place.

“Bob was looking for a range of outcomes from this transaction and he is very happy with the value the transaction has delivered him and his family, and with a buyer who will provide a strong platform for the future growth of the business,” Hexton says.