Information on the Target

Avallon MBO FUND I, the owner of Poland's largest chain of organic food stores, has sold its entire stake to Italian organic food distributor EcorNaturaSi. This strategic decision involved the sale of 63.4% of the company's shares for over 39 million PLN, driven by the growing trend for eco-friendly food and the conclusion of the fund's investment cycle. Avallon has been involved with the company since 2010, witnessing significant growth in revenue from 30 million PLN to over 80 million PLN by 2015, with expectations of reaching 100 million PLN in 2016 as per the company's management forecasts.

At the time of Avallon's acquisition of Organic Farma Zdrowia (OFZ), the company primarily focused on retail sales through stores located in major shopping centers. Today, OFZ is recognized as a leader not only in retail but also in wholesale distribution with Eco Wital.

Industry Overview in Poland

Poland's organic food market has been experiencing robust growth, fueled by increasing consumer awareness and demand for healthy, sustainable food options. The market has thrived on the back of changing consumer behaviors, with many opting for organic products due to their perceived health benefits. This trend reflects a broader shift towards sustainability and environmental consciousness among Polish consumers.

The growth in the organic sector has also been supported by various legislative measures and EU funding aimed at promoting organic farming practices within the country. This support has allowed Polish producers to enhance their offerings and meet international standards, making Polish organic products more competitive on the global stage.

In addition to favorable consumer sentiment, the retail landscape is also evolving. Traditional brick-and-mortar stores are supplemented by online platforms, enabling greater access to organic products. This diversification in distribution channels is expected to further stimulate growth in the sector, paving the way for new entrants and fostering innovation in product offerings.

Given the promising outlook, the organic food industry in Poland is likely set for continued expansion, benefiting from both domestic and global trends that favor healthy, sustainable living.

The Rationale Behind the Deal

The sale of OFZ's shares was influenced significantly by the cyclic nature of the investment life of Avallon MBO FUND I, which is now in the process of divesting its portfolio companies. By proceeding with the sale to a strong industry player like EcorNaturaSi, Avallon aims to ensure that OFZ will continue to thrive and grow under new management.

The expected collaboration between OFZ and EcorNaturaSi is poised to leverage synergies that can enhance both operational efficiency and market reach, ultimately benefitting consumers with greater access to organic products.

Information About the Investor

EcorNaturaSi stands as the largest distributor of organic and biodynamic food in Italy, boasting over 30 years of experience in the organic agriculture sector. As a significant player in the European market, EcorNaturaSi markets around 6,500 products across more than 1,000 retail locations, including 220 of its own Bio Supermarkets in Italy, employing nearly 1,000 staff members. The Group reported revenues of €330 million in 2015, asserting its established position within the organic food landscape.

Avallon MBO FUND, a pioneer in management buyouts in Poland, has been operating since 2001. Its investors include international financial institutions like the European Bank for Reconstruction and Development and funds managed by Swiss firm Akina Partners. Currently, Avallon MBO FUND II, armed with €100 million, is actively investing in various sectors, primarily targeting firms with revenues between 50 and 250 million PLN.

View of Dealert

This strategic sale of shares represents a significant opportunity for both OFZ and EcorNaturaSi, potentially marking a new chapter in the growth of the organic food industry in Poland. The deal not only aligns with current market trends but also positions OFZ to benefit from EcorNaturaSi's extensive experience and established distribution channels.

Moreover, EcorNaturaSi’s robust operational framework may enhance OFZ’s visibility and penetration in the market, allowing it to maintain its leadership position as well as adapt to evolving consumer preferences. This strategic partnership is likely to bolster the overall value of OFZ in the competitive landscape of organic food retailing.

On the other hand, Avallon's divestment can be seen as a prudent decision aligned with the lifecycle of its investment fund, paving the way for further investments in emerging opportunities within the sector. The sale marks the culmination of nearly six years of fruitful collaboration that has seen substantial growth.

Overall, this investment appears to be sound, as it captures the essence of market dynamics while also providing avenues for continued growth, making it a commendable move for all parties involved.

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