Kagome’s Shares Soar as it Expands U.S. Presence with California Tomato Processing Acquisition
Japanese food company Kagome acquires a majority stake in Ingomar Packing, a California-based tomato processing company, in a deal worth $243.3 million.
Kagome, the renowned Japanese manufacturer of ketchup and vegetable juices, witnessed a significant surge in its shares following its recent acquisition of a majority stake in Ingomar Packing, a prominent tomato processing company based in California. The $243.3 million deal has not only bolstered Kagome’s presence in the United States but also positioned the company for substantial growth in the tomato cultivation and processing sector. This strategic move is expected to significantly enhance Kagome’s revenue and net profit, propelling the company towards further success.
Strengthening Capabilities and Expanding U.S. Business
Kagome’s acquisition of a 50% stake in Ingomar Packing, coupled with its existing 20% stake in the company, solidifies the Japanese food giant’s position in the tomato processing industry. The acquisition is aimed at fortifying Kagome’s capabilities in tomato cultivation and processing, thereby strengthening its U.S. business operations. By expanding its footprint in the American market, Kagome aims to capitalize on the growing demand for tomato-based products, such as tomato paste and diced tomatoes.
Projected Revenue and Profit Growth
With the acquisition of Ingomar Packing, Kagome anticipates a substantial increase in revenue of approximately 30%. Moreover, the company expects its net profit to double as a result of the acquisition. Kagome has projected a net profit of 9.00 billion yen ($60.7 million) on revenue of Y222.00 billion for the year 2023. These optimistic forecasts reflect Kagome’s confidence in the potential of the tomato processing industry and its ability to leverage its newfound capabilities to drive growth.
Sellers and Financing
The four sellers of the stake in Ingomar Packing are California-based farming businesses specializing in the production of raw tomatoes and other agricultural crops. Among these sellers are two companies led by Ingomar Chief Executive Greg Pruett. The sale of the stake marks a significant milestone for these farming businesses, as they divest their interests in the tomato processing industry.
To finance the acquisition, Kagome took a bridge loan and plans to sell treasury shares to partially repay the loan within approximately one year. This financing strategy ensures that Kagome can swiftly integrate Ingomar Packing into its operations while maintaining a solid financial position.
Ingomar Packing’s Performance
In the fiscal year ending in June, Ingomar Packing reported a net income of $53.1 million on revenue of $310.5 million. The company’s robust financial performance, coupled with its $115.5 million in net assets, underscores its value as an attractive investment for Kagome. By leveraging Ingomar Packing’s expertise and resources, Kagome aims to further enhance its product offerings and market presence in the United States.
Conclusion:
Kagome’s acquisition of a majority stake in Ingomar Packing marks a significant milestone in the company’s expansion strategy. By strengthening its capabilities in tomato cultivation and processing, Kagome aims to bolster its U.S. business and tap into the growing demand for tomato-based products. The projected increase in revenue and net profit highlights Kagome’s confidence in the potential of the tomato processing industry. As Kagome continues to innovate and expand its product portfolio, the company is poised for further success in the global food market.