France's InVivo has agreed to buy one of Brazil's largest pet food makers, the latest Western company keen to tap into an expected rise in spending on pets in emerging markets as consumers become wealthier.
The French agricultural group's InVivo NSA division, which recorded sales of 1.3 billion euros ($1.7 billion) in 2013/14, will acquire Total Alimentos for an undisclosed sum from its family owners, InVivo said on Wednesday.
Pet food is attracting interest from companies that expect consumers in emerging markets in Latin America and Asia to spend more money on domestic animals. Pharmaceutical giant Eli Lilly (LLY.N) cited the trend as a factor in its takeover this year of the animal-health business of Novartis (NOVN.VX).
Total Alimentos, which has annual sales of about 170 million euros, is the joint No. 3 pet food supplier in Brazil by volume and is also a leading player in Uruguay and Colombia, InVivo said.
The Brazilian firm will give InVivo NSA a platform to expand in Latin America's pet food sector after it initially developed the business in Mexico, executives said.
"Mature markets (for pet food) are tough but in emerging markets there is room for a challenger to become a No. 2 or No. 3 player," Thierry Blandinieres, InVivo's chief executive, told reporters.
Total Alimentos also produces feed for the farming sector, including aquaculture that InVivo is targeting as another fast-growing area for animal nutrition.
CAPITAL INCREASE
The French firm, which is a grouping of more than 200 farming cooperatives, wants to double in size in the next 10 years and has set the same target for its animal health branch.
InVivo NSA is studying six other possible acquisitions, including one in Indonesia that is close to being finalised, further deals in South America and also targets back in France, executives said.
To help finance its expansion, the company is talking to potential investors to carry out a capital increase.
The capital increase, which InVivo aims to finalize in January, would be accompanied by the raising of new debt that together are expected to be worth about 500 million euros, they said.
French bank Credit Agricole (CAGR.PA) and farmer-controlled investment fund Unigrains, which currently control 23 percent of InVivo NSA and are due to cede their stakes this year under a previous capital deal, could potentially re-invest, they said.
InVivo is also an international grain trader and its trading branch has been developing operational links with U.S.-based Archer Daniels Midland Co (ADM.N) to boost its international presence.
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