Korean Food Giant to Pay $1.84 Billion for Schwan's

(Bloomberg) -- Asian food giant CJ CheilJedang Corp., agreed to buy a stake in Schwan’s Co., maker of Mrs. Smith’s pies and Tony’s pizza, for $1.84 billion to expand its sales in the U.S. food market.

The Korean company will buy an 80 percent stake in Marshall, Minnesota-based Schwan’s and subsidiaries that focus on foods sold in stores and food-service venues, according to a CJ filing and press releases from Schwan’s and CJ CheilJedang on Thursday. Schwan’s is privately held. The Schwan family will retain full ownership of the home-delivery service.

Key Takeaways

• CJ CheilJedang, part of South Korean conglomerate CJ Group, has been expanding in overseas markets, particularly in the frozen-food business. The company in August said it will buy U.S.-based Kahiki Foods and Germany’s Mainfrost for undisclosed sums, according to Yonhap.
• Frozen-food sales are growing after years of decline. Even millennials, known for their foodie tastes, are embracing frozen meals, which are less expensive than takeout.
• The pressure on packaged-food makers to get bigger has intensified in the aftermath of Whole Foods Market Inc.’s sale last year to Amazon.com Inc. Conagra Brands Inc. agreed in June to buy Pinnacle Foods Inc. for about $8.1 billion in cash and stock, gaining freezer-aisle brands such as Birds Eye.

Market Reaction

• Shares of CJ CheilJedang advanced after the announcement, pushing the stock to a five-month high of 355,000 won. The company’s stock has slipped 2.7 percent this year.

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• Seoul-based CJ CheilJedang is one of Korea’s largest food companies, with a market cap of $4.7 billion and annual revenue of about $15 billion. The company entered the U.S. market in 2005 by acquiring Annie Chun’s Inc., a maker of Asian-inspired foods.

To contact the reporter on this story: Jeff Sutherland in Tokyo at jsutherlan13@bloomberg.net

To contact the editors responsible for this story: K. Oanh Ha at oha3@bloomberg.net, Dave McCombs

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