Mexico’s Grupo Bimbo, one of the world’s largest bakery companies, has acquired Modern Food Enterprises Pvt. Ltd from private equity firm Everstone Capital to expand its India operations, The Capital Quest has learnt.
The transaction was executed recently and three Grupo Bimbo representatives joined Modern Food’s board last week, a person familiar with the development told The Capital Quest. Everstone nominees have vacated the board.
The deal value could not be immediately ascertained.
The Mexican company has hired Raj Kanwar Singh, former CEO of Godrej-owned Creamline Dairy, to lead the business.
Everstone and Grupo Bimbo did not respond to email queries sent late evening till the time of publishing this article.
Modern Food, an iconic label, was one of the first large brands selling bread in the country. The company was launched in 1965 as Modern Bakeries (India) Ltd and was rechristened as Modern Foods India Ltd in 1982. It was privatised by the government in 2000 and sold to Hindustan Unilever Ltd.
The local arm of Unilever Plc sold the brand in 2016 to Everstone Capital. The PE firm relaunched the brand and has been selling various products, including breads. As per its website, it also ventured into categories like dosa batter.
In 2018, Everstone acquired the India unit of Australian bakery chain Cookie Man via Modern Food.
However, the company was struggling to scale up as planned. It had projected to hit revenue of Rs 1,000 crore by 2020-21. Although the latest financials of the company are not available in the public domain, it is believed to be far from the target, even with the Cookie Man acquisition that added around Rs 20-30 crore in annual revenue.
Everstone is believed to have pumped more money into the company to make up for the shortfall. It is unlikely to have made big gains in terms of annualised returns. At best, it could have managed a premium for giving Grupo Bimbo a national foothold.
Separately, VCCircle said the deal was struck for around Rs 600 crore ($82.7 million). This could not be independently ascertained.
However, if Everstone did pay that amount, it may have generated annualised returns in the range of 15-20%. That compares with the 20-30% return that PE firms typically aim for in emerging economies.
For Grupo Bimbo, the deal is the second in India and makes it a significant player in the bread category. It had acquired a majority stake in the firm that sells products under the Harvest Gold label in 2017.
Modern Food is one of three national-level players in the bread category; Britannia Industries and English Oven, owned by Mrs Bector’s Food Specialities Ltd, are the other two.
For Grupo Bimbo, this deal marks a bigger move to become a sizeable player in the country. Harvest Gold, which it acquired four years ago, is a regional brand present in north India.