The troubles in Germany will continue to haunt Vion for a while. The meat company had hoped to leave this market - which has often been loss-making in the past - as soon as possible, but must look for a new buyer now that the cartel service prohibited the sale of the beef activities to Tönnies last week. This is a major setback for management. Valuable time has been lost in recent months, while the company cannot afford that at all.
In September last year, Vion closed a deal with Tönnies for the sale of no less than three slaughter locations. A few months earlier, Vion had put these up for sale by indicating that it only wanted to focus on the BeNeLux. Various buyers came forward, 'but with Tönnies we came out on top', said current CEO Tjarda Klimp in an interview with the FD last year. The sale is absolutely necessary, she admitted openly. Not to make a profit, but to be able to guarantee the continued existence of Vion and to put more fat on the bones. Due to a number of heavy losses in a row, the equity has been significantly eroded.
Weaker negotiating position
The deal with Tönnies has completely collapsed. The German cartel service also does not allow the transaction to be split up to remove the sensitivities, as is sometimes done in these types of processes to smooth things out. Apparently they consider the market power that Tönnies already has on the German meat market to be big enough. This means that Vion has to look for a new buyer. The question is whether that buyer is prepared to put the same amount on the table. In any case, Vion's negotiating position has not become stronger now that the wealthy Tönnies has been sidelined. The ruling will probably also make other dominant players on the German meat market cautious, because there is a reasonable chance that the competition authorities will ultimately not give the green light.
Precious time lost
Almost immediately after the ruling by the cartel service, Vion sent out a press release in which genuine disappointment was evident. It was emphasized that it had no direct consequences for the company's operations. The German activities are now profitable again due to refinancing, it is stated. Klimp is now considering further steps and is probably also a bit taken aback that the deal has collapsed. Given that Vion has clearly stated its intention to leave Germany, finding a new buyer is the only option. Valuable time has been lost in recent months. After all, the sales process has to be started all over again, which also brings with it a large dose of negative energy.
Bet on a horse
Although there may be alternative buyers, time is running out. The company's solvency has deteriorated further in 2023 to 26%, which is just above the danger zone. A further deterioration is looming in 2024, because Vion has already hinted that these figures (expected in June) will again be colored by restructuring costs. The planned sale of three slaughter locations to Tönnies should boost equity, but this is not going to happen.
In retrospect, it can be concluded that Vion has really put all its eggs in one basket by selling no less than three large slaughter locations to the already dominant Tönnies. It may have yielded the best price, but the German cartel service should not be discounted in advance.