Norwegian conglomerate Orkla [OSL:ORK] is keeping the door open to a range of options for its subsidiary Orkla Food Ingredients (OFI), three sources familiar with and an advisor tracking the situation said.

These include a minority investment by a financial investor; a merger with another strategic asset, including private equity-owned ones; or an outright sale, but potentially not until further down the line, they said.

Orkla stated on 3 October 2022 that it would initiate a process to seek a long-term partner for OFI to accelerate growth and value creation.

The process is still in the preparation phase, two of the sources said, adding that the sellside plans to reach out to investors with marketing materials at the end of 1Q23 at the earliest.

Orkla has mandated Bank of America to advise on the process, as reported in local media in November. At this time, the structure of the deal had yet to be decided on, one of the sources said.

One likely scenario is for a PE firm to take a minority stake in the business and provide additional firepower for acquisitions, one of the sources, the advisor and another two advisors tracking the situation said.

There are plenty of PEs with investments in similar assets, which could potentially merge with OFI, two of the advisors and another advisor said. Investindustrial’s portfolio company CSM Ingredients would be “a really good fit”, two of the advisors said. Advent’s IRCA would also fit well, and Advent wants to grow the asset, one of them added. Strategics like Azelis [EBR:AZE], Brenntag [ETR:BNR], and Belgian, family-owned Puratos, could also show interest, one of the sources suggested.

There are several international strategic players that could buy OFI, one of the sources said. OFI aims to grow further in the US, having acquired Wisconsin-based ice cream ingredients business Denali Ingredients late last year, so a US partner would be advantageous to expand the business internationally, another of the sources and one of the advisors said.

It could make more sense to merge OFI with a peer. “A PE buyer might be less likely now, given headwinds faced by the consumer industry, financing difficulties, and so on”, this advisor added.

Orkla would likely also consider selling OFI outright if approached about this, one of the sources and the advisor said.

In any case, even if a PE only took a minority stake in OFI, Orkla would have to consider exiting the business down the line, two of the advisors said.

OFI could be worth NOK 8bn-12bn (EUR 750m-EUR 1.1bn), according to the November media report. It logged revenue of NOK 12bn in 2021, accounting for 24% of Orkla’s group revenues, with adjusted EBIT of NOK 0.6bn.

Orkla announced a new corporate structure on 27 October 2022, saying that it will be transformed into an industrial investment company consisting of 12 portfolio companies. It will assess acquisitions, joint ventures, stock market listings, and divestments of these companies, according to the announcement.

Orkla did not respond to a request for comment, while Bank of America declined to comment.