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(Updated 3/8/01)

Mars and Royal Canin confirm recent merger

THE LUCRATIVE worldwide pet food market was redrawn recently when Mars, the US food giant which owns Pedigree Masterfoods announced its intention to buy Royal Canin, one of Europe’s leading dog food companies for close on $1.3 billion. As reported in OUR DOGS last week, this shrewd move will give Mars a 56.4 per cent stake in the company and sales of some of Europe’s most upmarket pet food brands.

Mars announced that its Masterfoods subsidiary would pay 145 euros per share in cash for the French company, a premium of over 29 per cent of the average share price of Royal Canin in the last month.

The companies have already reached preliminary agreement to buy, with Mars making its acquisition in a three-stage transaction, taking the 56 per cent controlling stake in Royal Canin currently held by a unit of the French bank, BNP Paribas.

Both companies welcomed the deal, saying that it would combine Mars’ expertise in pet food sales through grocery outlets with Royal Canin’s dominant position as a supplier of nutritional and health pet food, sold mainly via specialist outlets. Mars, of course, owns leading pet food brands such as Whiskas and Pedigree Chum.

Royal Canin was founded by a vet in 1967 and has built on the idea that many owners treat their pets like human beings and are therefore keen to provide them with food suited to their specific needs, including age, condition and size. Last year the company launched a new brand for large breeds named Giant 28, which has proved to be a top seller in the market.

The company has focussed upon strengthening links with vets and animal specialists to enable the company to develop suitable products to meet customer demand.

Henri Lagarde, chairman of Royal Canin said bluntly: “You cannot be schizophrenic: you are either a grocery of a speciality pet food company.”

Last year, Royal Canin acquired James Wellbeloved, a British company manufacturing specialist, upmarket pet food brands, and now operates in the UK out of James Wellbeloved’s head office in Yeovil, Somerset.

Royal Canin’s UK Managing Director, Jaques Pidoux said that the merger would mean no redundancies amongst the workforce and pledged that Royal Canin products would remain unaffected and that the company would operate as a totally separate entity within the Pedigree Masterfoods group.

Dick Raper, chairman of Masterfoods Holding issued a joint statement with Royal Canin’s Henri Lagarde saying: “Mars intends to maintain this winning formula by Royal Canin operating as an independent unit within Mars, with global responsibility for accelerating growth in specialist outlets.

“Both companies will keep their own distinct and separate organisation worldwide and will continue to market their existing product ranges in their respective outlets.”

The deal is subject to the approval of the appropriate mergers authority within the EU.

The Mars/Royal Canin deal comes hard on the heels of Proctor and Gamble’s purchase of Iams, and Swiss giant Nestlé’s recent takeover of Ralston Purina, a leading US-based pet food company.

Nestlé are Mars’ main rival in Europe, so the acquisition of European pet food companies by the US giant is seen as vital to maintain a controlling position in the burgeoning pet food market.