AVCJ Awards 2016: Exit of the Year - Mid Cap: Golden Foods Siam

It was an unusual time for Navis Capital Partners to be considering a major investment in one of its portfolio companies. The firm's holding in Thailand-based cooked chicken producer Golden Foods Siam (GFS) was more than four years along, and management was already considering exit options. Another owner might have been tempted to leave a substantial construction project such as the proposed feed mill for the next buyer.

But the GP went ahead with the project, confident that the benefit to the company in increased self-sufficiency outweighed any complications that might arise in the exit process. Though the feed mill had long been under discussion, a recent decision to buy feed from fellow Navis portfolio company Bangkok Ranch had demonstrated the value of bringing the company's supply chain in-house.

"From Bangkok Ranch we suddenly saw how profitable it was to be the feed supplier, which opened our eyes to how much profit our suppliers were gaining from us," remembers David Ireland, a partner at Navis. "So that really accelerated our decision, and though it was quite late in the investment it turned out to be a great move."

For Ireland, Navis' willingness to push for new improvements, even at such a late stage, shows the strength of its commitment. Looking back after exiting the company to Brazilian raw poultry producer BRF, he is confident GFS remains on course to become one of the world's major cooked chicken suppliers.

Problem child

GFS was struggling when Navis bought it in 2009, although the GP didn't see a problem with the company itself. The management team was strong and Thiland's position as the world's third-largest exporter of cooked poultry offered potential for growth. But the owners had never shown it the support that could help it realize its potential.

GFS had passed through several hands since its founding in 1997 as Golden Foods International. UK-based Grampian Country Foods Group, which bought the company in 2001, was itself bought out by Dutch conglomerate VION Food Group seven years later.

The rotating ownership had made it difficult for management to secure backing for needed upgrades, and the company was languishing behind more focused family-run businesses such as Charoen Pokphand Foods (CPF). VION was seeking buyers, but the performance had left suitors skeptical. Navis felt all that was needed was for GFS' leadership to be let off the leash.

"It wasn't such a difficult decision for us to go forward, particularly when we saw what we liked in the management team and a very clear growth path," says Ireland. "In addition, because there wasn't much interest at the time from other parties, we were able to get in at a good valuation." The firm quickly made good its interest, paying an undisclosed amount for a 100% stake.

Determined not to repeat the mistakes of the previous owners, Navis set out immediately to put long-requested improvements in place. The first project was a new cooking facility, which was underway within months of the acquisition. The plant has doubled GFS' cooking capacity, giving it the production strength to expand beyond its core markets of Japan and the UK.

Other improvements were aimed at helping GFS separate to some degree from fluctuations in commodity prices. The new mill was the culmination of these projects, which continued to some degree throughout Navis' ownership.

"We wanted to control our supply chain a little bit more, so we invested in a couple of agricultural assets, expanded our breeding capability, expanded our hatchery, and so on," Ireland says. "Those weren't dramatic or large investments, but it was an attempt to gain more control and not be impacted by outside suppliers as much as they had been in the past."

With the awaited upgrades coming online, GFS' performance has substantially improved. It has become Thailand's third-biggest cooked chicken producer, behind CPF and multinational Cargill. The company has also made significant progress expanding its customer base in markets such as the Middle East, Korea and Southeast Asia.

Active suitors

It didn't take long for GFS' progress to catch the eye of potential acquirers. Navis had always seen a strategic player as the best bet to take over the company, and BRF was a natural fit. As a leading raw chicken exporter in the industry's most important region, South America, it had the sector expertise and professional networks to take GFS to the next level.

"It's all part of their global outreach, selling into the same markets that we did, and maybe accelerating that now because they have greater resources," says Ireland. "They have a bigger footprint and they have offices in places where they're already selling raw Brazilian chicken, where they can now funnel some of the GFS product."

However, BRF could not take control of GFS right away. The company's success had brought other potential buyers, and Navis was able to benefit from their competition. Ultimately BRF won out, and the GP walked away with $360 million and a return of 3.4x. The process was one final payoff for the investor. Though GFS was undervalued at the time of investment, Navis was confident that buyers would recognize the opportunity once it was on the right track.

"The company was attractive because it was really the only asset of that size that was going to come for sale in Thailand, because all the others are more or less controlled by families," Ireland explains. "So we were able to get a good competitive dynamic going and that ultimately enabled us to get a better price."

Pictured: Rodney Muse (left) and Nick Bloy (right) of Navis Capital Partners receive the award from Alvarez & Marsal's Eric Wang

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Southeast Asia
• Industrials
• Consumer
• Trade sale
• Thailand
• Navis Management
• Exit
• AVCJ Awards