Strategic deals
Again and again, large companies in almost every industry are buying up smaller operations to consolidate their power either horizontally or vertically. Each individual acquisition may be relatively modest, but the end result is shrinking competition and fewer alternatives for clients. Here are a few recent examples.
Steel: Nucor buys Marion Steel
Nucor, now the #2 US-based steel company (#11 in the world), recently announced it would acquire Ohio-based Marion steel for $112 million. Nucor, with revenues of $11 billion, specializes in minimills, with just-in-time delivery of custom products. It also is the largest recycler of scrap metal. Marion Steel specializes in bar steel.
Earlier this year, Nucor bought Fort Howard Steel, another small independent bar steel mill. With Dutch-headquartered Mittal Group now a major competitor in the US, teh other players have to expand to survive.
Retail: Bertelsmann buys French book chain
In a vertical move, publishing giant Bertelsmann went into the bookstore business buy buying out Privat, the #2 bookseller in France. That's not a big stretch for Bertelsmann, whose book clubs from its DirectGroup division are highly successful. France Loisirs, the Bertelsmann book club in France, already owns 8% of the French book market. The #1 share in the book market belongs to the Fnac chain, with about 16% market share.
Bertelsmann, according to a recent Wall Street Journal report, is concentrating more on its core book and magazine products, a change in direction from its expansion in the varied media under its previous CEO.
Food & Beverage: San Miguel goes Australian
Philippine food company outbid New Zealand rival Fonterra after a long battle to buy out Australia's largest dairy, National Foods. San Miguel is best known for its beer brand, which is sold through East Asia. It is dominant vendor for beer, soft drinks, and foods in its own country. National Foods has such major Australian brands as Pura and Big M milk, King Island cheeses, Yoplait yogurts (by license), and Fruche desserts. It has about a third of the Australian dairy market. The deal cost around $1.5 billion US.
San Miguel is looking at further expansion in both Asia and Australia, mostly in the food and beverage industries. It already owned 50% of Berri, Australia's top juice maker, and a specialty Australia brewer (Boag & Sons Ltd.). It also operates soft drink plants in China, Thailand, Vietnam, and Indonesia. As such, it is looking to become a regional food and beverage power.
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