Findus, Newcastle-upon-Tyne, England, producer of frozen fish and vegetables, has written off about £440 million following its debt-for-equity swap earlier this year. Strained finances, together with the already tough economic climate in much of western Europe, have prompted renewed speculation that it could become a takeover target.
Company accounts show goodwill and brand impairment losses of £219 million last calendar year when it generated earnings before interest, tax, depreciation and amortization of £90.4 million, down from £117 million in 2010 and a similar amount is likely to have been erased this year. Largely as a result, it reported an operating loss of £241m, versus a £17m restated profit in 2010.
Findus, like other food manufacturers that ramped up in the era of ready debt, has breached bank covenants and was forced to refinance earlier this year. Owner Lion Capital, the consumer-focused private equity firm, fended off Triton Partners which sought to take over Findus in June. But doing so meant converting £240 million of mezzanine debt into equity. Lion, which bought Findus for £1.1 billion in 2008, now owns about a third of the company. As of December, Findus had net debt of £683.5 million and equity of £440 million.
Its bigger rival, Birds Eye Iglo, pulled plans earlier this year for a sale after receiving bids that priced the maker of Captain Birds Eye fish fingers below the EUR 2.8 billion sought by private equity owner Permira. Some putative buyers had viewed any acquisition as a platform to roll up other frozen foodmakers such as Findus.
Yet Findus' owners reckon it is now on a viable financial footing, with a fresh set of financial covenants, and capable of riding out the downturn. It generated operating cash flow of £102 million last year and has been able to pass on some of the £150 million in input inflation, much of it from seafood such as salmon and shellfish, sustained since 2008.
