Hillsdown Holdings plc
Hillsdown Holdings plc
Public Company Incorporated: 1975
Sales:£2.65 billion (1997)
Stock Exchanges: London
SICs: 0251 Broiler, Fryer & Roaster Chickens; 0252 Chicken Egg Production; 0253 Turkeys & Turkey Eggs Production; 0254 Poultry Hatcheries Production; 1521 General Contractors-Single Family Homes; 2015 Poultry Slaughtering & Processing; 2033 Canned Fruits, Vegetables, Preserves, Jams & Jellies; 2052 Cookies & Crackers; 2084 Wines, Brandy & Brandy Spirits; 2086 Bottled & Canned Soft Drinks & Carbonated Waters; 2098 Macaroni, Spaghetti, Vermicelli & Noodles; 2099 Food Preparations, Not Elsewhere Classified; 2519 Household Furniture, Not Elsewhere Classified; 6719 Offices of Holding Companies, Not Elsewhere Classified
Hillsdown Holdings pic is a somewhat obscure holding company for a wide range of food, homebuilding, furniture, and other subsidiaries—all independently operated—which are organized into six operating divisions. Four are in the area of European food—Ambient, Chilled, Potatoes, and Poultry—with the others being Housebuilding and Furniture & Specialist. Ambient manufactures tea, chocolate beverages, biscuits and cookies, canned foods, pickles and preserves, and pasta. Chilled makes salads and a variety of prepared foods. The only subsidiary in the Potatoes division is MBM Produce Limited, which is a leading U.K. potato processing and packaging concern. Poultry includes chicken and turkey rearing, processing, and breeding, as well as egg producing. Hillsdown’s food operations produce both branded and private-label products and hold a number of leading positions in the United Kingdom and Europe. The company’s Housebuilding division includes Fairview New Homes Pic, one of the largest homebuilders in southeast England. The Furniture & Specialist division manufactures furniture for the retail, mail order, and office furniture markets; and also makes suspended ceilings. Overall, about 70 percent of Hillsdown’s revenues are generated in the United Kingdom, with about 26.5 percent from continental Europe and the remainder from countries outside of Europe.
Founded in 1975
Established in 1975, Hillsdown’s growth has been nothing short of phenomenal. The company’s founders, Harry Solomon and David Thompson, were a lawyer and a butcher, respectively, when they met in 1964—after their wives had become friends at a prenatal class. Solomon soon became Thompson’s legal counsel, advising him as he purchased interests in other companies. In the mid-1970s, they decided to form their own company to manage their investments in such fields as timber, stationery, and securities more efficiently. They named their company Hillsdown, after Thompson’s house; rented an office; hired an accountant; and set out to wring value from businesses where others saw none. In so doing, Thompson and Solomon built a company that has had a significant impact on food production in the United Kingdom.
Hillsdown Holdings’ acquisitions began in earnest in 1981, when the company made its first big purchase, of Lock woods Foods Limited, a bankrupt cannery that Hillsdown paid £3.5 million for. By the time Hillsdown purchased the Imperial Group’s poultry, egg, and animal-feed businesses for £39 million the following year, its acquisition strategy was already in place. In general, Hillsdown shunned hostile takeovers, preferring instead to make friendly arrangements with the company’s present management. The company was committed to capital infusion and refused to strip assets from newly acquired properties, believing that adding value to commodities was the key to success. Rather than attempt to run their properties themselves, Solomon and Thompson from the start appointed independent managers to run Hillsdown’s subsidiary companies as if they owned them. The company strived to limit overhead caused by red tape and bureaucracy, and often streamlined management at the firms it bought—Lockwoods’ management was reduced to 40 from 120, and a later purchase, Maple Leaf Mills, saw its central staff shrink from 80 to 11. Hillsdown itself maintained a head office of about 20. Control of day-to-day operations remained in the hands of subsidiaries, who reported to directors at economically furnished headquarters in North London. Besides an annual meeting with the Hillsdown director for their industry, subsidiaries were simply required to submit a one- or two-page financial report once a month to Hillsdown.
Hillsdown acquisitions in the same industry were not usually merged, but encouraged to compete—even for the privilege of supplying other Hillsdown subsidiaries with raw materials. In this way, the parent company profited by piecing together its many different companies in the fragmented food-processing field into a vertical whole, allowing it to earn money and control quality at every step. For instance, in the poultry business, Hillsdown companies could provide everything from the breeder hen that lays the egg to the frozen Chicken Kiev dinner it will eventually become.
Despite its dominance in the food industry, Hillsdown eschewed flashiness in both personnel and products. Solomon and Thompson were notoriously publicity shy, and there were few products that bore Hillsdown’s name. Instead, each product bore the brand of one of Hillsdown’s many subsidiaries, or the mark of one of the leading retailers such as Marks & Spencer, Tesco, and Asda with which Hillsdown has developed close and lucrative ties. The company made a handsome profit on its willingness to work with its customers to provide whatever it was they wanted.
In 1983 Hillsdown continued to grow by purchasing ailing and undervalued food companies such as TKM Foods and Smedley’s canning business, both acquired for a token £1, and FMC, Europe’s largest slaughterhouse, for a rock-bottom £4.9 million. The next year, Thompson and Solomon picked up Henry Telfer, a manufacturer of meatpies, again for £1. In its first decade, Hillsdown spent about £50 million making bargain-basement purchases of this sort to become the United Kingdom’s fourth largest food manufacturer, with sales of £1 billion. But these acquisitions, it soon turned out, were mere warm-up exercises.
Mid-1980s Acquisitions Binge
Hillsdown Holdings went on a marathon buying binge after it put a quarter of its shares on the market in February 1985. The company made 42 acquisitions in 20 months, stunning London’s financial community with the pace of its activity. Newspapers reported that Hillsdown bought a new company every six days. Its acquisitions, scattered as they seemed, all fell into one of five major areas: food, timber, furniture, stationery, and property. Skeptics questioned the point of assembling an empire of such disparate parts, and doubted that one company could sensibly manage such far-flung interests. At the end of its spending spree, Hillsdown was the largest British producer of eggs, poultry, meat, and canned goods, and was second in the timber business. Its profits had grown in proportion to its size.
Throughout this period of enormous growth, Hillsdown stuck, for the most part, to a policy of making friendly bids for small companies. London’s financial community waited for what rumormongers called the “big one.” In spring of 1986, it came. Hillsdown began its first large contested bid for a company by increasing its stake in S. & W. Berisford, a commodities-trading firm that had purchased the British Sugar Corporation in 1982. The company was already conducting talks with an Italian food and agricultural group when Hillsdown came on the scene, and soon Tate & Lyle, another British sugar refiner, entered the fray. In April, Hillsdown made its move, offering to buy Berisford for £486 million with the support of the Italian firm. When both bids were referred to the British Monopolies and Mergers Commission in May, however, Hillsdown withdrew, selling its stake in Berisford back to its Italian partner at a handsome profit.
The following year, Hillsdown strengthened its ability to develop small companies by launching the Hillsdown Investment Trust. HIT was set up to provide money and advice to companies with strong potential that were too small or diverse in activity for Hillsdown to buy outright. That year also saw the company acquire Fairview New Homes, one of the largest homebuilders in southeast England. Also in 1987 Hillsdown began to expand in earnest beyond British shores. In July, it moved into North America with its purchase of Maple Leaf Mills, a Canadian food conglomerate, for £169 million in cash, its largest acquisition yet. At the same time, it launched operations on the European mainland with the formation of Hills-down International B.V.
Hillsdown Holdings pic is one of the United Kingdom’s largest companies. Whilst it is primarily involved in the manufacture of a wide range of food products, it also has substantial UK interests in the housebuilding and furniture industries. The company was only founded in 1975 and in the space of 23 years has become one of Europe’s leading own food label food manufacturing operations with significant branded interests.
Although Maple Leaf Mills (later known as Maple Leaf Foods) appeared to be an excellent match for Hillsdown’s interests, the large debt Hillsdown incurred to buy it gave British investors sweaty palms. After making 50 purchases in 1987, Hillsdown found itself with a reputation as a rapacious acquis-itor that could only make money through constant buying. To counter this impression, the company began to scale back the pace of its purchases in an attempt to consolidate holdings and reduce its level of debt. Hillsdown restrained itself in 1988, buying only 31 small businesses.
Fighting the perception that the company was “a dead duck in a bear market,” as the Independent put it, the company strengthened its overseas holdings through further purchases in the Netherlands and North America, and attempted to demonstrate long-term internal growth, rather than short-term acquisitions-fueled growth. Despite lagging performance from its traditionally troubled red-meat companies, Hillsdown largely succeeded in demonstrating that the firm was sound even when it was not buying food companies as often as most people buy food. Attempting to widen the margin of profit on the commodities it produced, Hillsdown concentrated on adding value to its products by processing them as far as possible.
Despite its strong performance, Hillsdown’s market value remained stagnant in the year following the 1987 stock market crash, in part, again, because the company’s far-flung interests made investors nervous. Moving toward a more unified company profile, in September 1988 Hillsdown sold off a large timber company and purchased Premier Brands Foods—maker of Ty-phoo and other brands of tea and instant chocolate and malt drinks—for £195 million in May 1989. Shortly thereafter, it sold off stationery and printing businesses, so that more than 80 percent of the company’s sales were concentrated in the food industry.
Also in early 1989, David Thompson, Hillsdown’s co-founder, sold his final 14.5 percent share in the company for £154 million. Thompson had first stepped down from an active role in the company in April 1987, when he sold half his 30 percent share. The firm’s other cofounder, Harry Solomon (who became Sir Harry after being knighted in 1991), was left in charge of Hillsdown following Thompson’s retirement.
Solomon faced challenging times in the early 1990s as a recession hurt Hillsdown’s commodity-side food businesses—poultry, eggs, and red meat—while the company’s processed food companies fared relatively better. By 1992, Solomon had committed to further restructuring of the company’s holdings, emphasizing food to an even greater degree. During 1992 Hills-down closed or sold 17 underperforming and/or noncore businesses, including two property companies. Early the following year, Solomon retired, with David Newton, who had headed the company’s North American operations, becoming chief executive and Sir John Nott, a former politician and merchant banker, becoming chairman.
The new leaders continued to restructure Hillsdown’s operations, in particular divesting the company’s various red-meat businesses over the next few years. First to go in 1993 were several slaughtering facilities. The company’s exit from red meat was complete in late 1997 when it sold seven businesses to Cinven for £53.6 million, including its last four remaining meat companies; Strong & Fisher, a leather tanning company; Poupart, a fresh fruit wholesaler; and Firstan, a cardboard packaging concern. Another major divestment during this period was that of Maple Leaf Foods, which Hillsdown sold to the Wallace McCain family and the Ontario Teachers’ Pension Plan Board for about C$623 million (£275 million).
Meanwhile, Hillsdown was making very selective acquisitions that built upon its core food businesses, acquisitions funded in part by the company’s divestments. In late 1994 the company spent about £20 million for Lyons Biscuits, the U.K. biscuit business of Allied Domecq, which Hillsdown merged into its existing biscuits unit. The first half of 1996 saw two major purchases. Hillsdown paid £121 million for Hobson, a private-label food and drink manufacturer whose tea, biscuits, sauces, and pickles fit in particularly well with Hillsdown’s existing product lines. The company also acquired Allied Domecq’s Continental Bakeries unit for £49 million, further bolstering its already strong biscuits operations into the number five position in Europe.
In mid-1996 Newton stepped down from his position as chief executive and was replaced by George Greener, who had most recently been chairman of the U.K. financial services businesses of BAT Industries. Under Newton’s leadership, Hillsdown had sold businesses that had generated annual revenues of £2 billion while also building the company into leading positions in fresh poultry, canned goods, tea, and chilled salads.
Greener, meanwhile, had a reputation as someone unafraid of making tough decisions. This was perhaps exactly what the company needed as it still in early 1998 held a very unorthodox portfolio of companies, with the homebuilding and furniture operations standing as particular oddballs in a largely food-oriented company. Further dispositions, therefore, seemed likely with equally likely prospects for further food acquisitions.
A Krombach & Sóhne GmbH (Germany); Chivers Ireland Limited; Chivers Hartley Limited; F.E. Barber Limited; HL Foods Limited; Holco B.V. (Netherlands); Hooimeijer BV (Netherlands); Hubert Hagemann Internationale Gebäckspezialitaten GmbH & CoK.G. (Germany; 60%); Mateme SA (France); N.V. Pirou Wafer (Belgium); Picard Holding SA (France); Premier Brands (UK) Limited; Premier Brands France S.A.; Andros Food S.A. (Spain; 80%); Henry Telfer Limited; Johma Holding International B.V. (Netherlands); Kobenhavns Salatfabrik A/S (Denmark); Magdis SA (France); Nadler Werke Holding GmbH (Germany); Pinneys of Scotland Limited; Smedleys Foods Limited; MBM Produce Limited; Buxted Chicken Limited; Buxton Foods Limited; Daylay Foods Limited; Devon Crest Poultry Limited; Hencu Beheer B.V. (Netherlands); Moorland Poultry Limited; Premier Poultry Limited; Ross Breeders Limited; Ross Breeders Inc. (U.S.A.); Ross Poultry Limited; Carleton Furniture Group Limited; Christie-Tyler pic; Fairview New Homes Pic; Formwood Group (UK) Limited; Walker & Homer Group PLC; JJ. Yates & Co., Limited (75%); Riverside Developments (South Bank) Limited (50%).
Ambient; Chilled; Potatoes; Poultry; Furniture & Specialist; Housebuilding.
Blackhurst, Chris, “A Meaty Principle,” Management Today, December 1990, p. 116.
Duval, Brett, “Hillsdown Holdings pic,” Fortune, January 19, 1987, p. 66.
“Hillsdown Set to Play Role as Premier’s Paternal Guardian,” Marketing, June 1, 1989, p. 4.
Jonquières, Guy de, “The Dilemma Facing Food’s Rag and Bone Men,” Financial Times, September 21, 1992, p. 24.
_____, “Hillsdown Seeks to Cure Jitters in the City,” Financial Times, March 6, 1992, p. 21.
Maitland, Alison, “Hillsdown to Exit Pig Meat Business,” Financial Times, February 28, 1996, p. 23.
Monopolies and Mergers Commission, Hillsdown Holdings pic and Pittard Garnar pic: A Report on the Proposed Merger, London: HMSO, 1989.
Oram, Roderick, “Brands Can Join Forces with Own-Label,” Financial Times, April 20, 1995, p. 28.
_____, “Hillsdown Pays £121M for Hobson,” Financial Times, December 14, 1995, p. 22.
Urry, Maggie, “A Look at the Life and Times of an Empire Builder,” Financial Times, December 17, 1992, p. 22.
Warner, Liz, “Solomon’s Mind,” Marketing, September 10, 1987, p. 25.
Willman, John, “Hillsdown Sells Last Red Meat Businesses,” Financial Times, September 5, 1997, p. 18.
—updated by David E. Salamie