NORWAY – Norwegian group Orkla has completed the sale of a minority stake in its food and ingredients unit, Orkla Food Ingredients (OFI), to the global private-equity firm Rhône for an enterprise value of Nkr15.5 billion (US$1.4 billion).

As a result of this transaction, Rhône now holds a 40% ownership stake in OFI.

OFI, which was established by Orkla in 1999, encompasses a broad range of categories, including bakery, pastry, and ice-cream ingredients, as well as plant-based dairy alternatives for consumers.

The business operates in 23 countries and employs over 4,000 people. It is organized into three clusters: ingredients, sweet ingredients, and plant-based, accounting for 63%, 21%, and 17% of OFI’s operating revenue, respectively.

“By the closing of the transaction, OFI will replace existing financing from Orkla with an Nkr6.4 billion (US$576 million) committed bank facility (not to be fully drawn at closing) with no recourse to Orkla ASA, containing net debt to EBITDA and interest cover covenants,” Orkla confirmed.

The transaction also includes an option for Rhône to acquire an additional 9% of OFI equity at the same price per share as the initial transaction.

Both Orkla and Rhône will have representatives on OFI’s board of directors, with the board to be led by Orkla executive vice president Øyvind Torpp. Johan Clarin will continue as CEO and manage OFI.

“The partnership search for OFI attracted strong interest. I am proud that we are joining forces with a best-in-class organization in Rhône,” Orkla’s group president and CEO, Nils Selte, said.

“The Rhône team’s partnership commitment and strategic attributes stood out. This is a landmark deal for Orkla that puts OFI in a position to continue its organic and structural growth journey.”

Orkla’s divestment of the minority stake in OFI aligns with its strategic shift, following the company’s decision to spin off its businesses into 12 individual units last year, which has opened opportunities for mergers and acquisitions within the Nordic food group.

The transaction is expected to be completed by the end of the first quarter of 2024, pending approval from relevant authorities and customary closing conditions.

Orkla also reported its third-quarter results on October 26, which revealed that operating revenues increased by 14% to Nkr16.8 billion (US$1.512 billion), with adjusted EBIT rising by 16% to Nkr1.8 billion (US$162 million).

Eight of the 12 portfolio companies reported underlying profit growth, including OFI. However, OFI’s volumes declined by 1.1% in the third quarter, primarily in the bakery and ice cream segments.

In addition to this announcement, Orkla also revealed that the CEO of Orkla Foods Europe, Paul Jordahl, will step down from his role at the beginning of November.

Atle Vidar Nagel Johansen will temporarily take up the position. Nagel Johansen has been a member of Orkla ASA’s management team since 2012 and currently holds the position of EVP and investment executive.