Gryphon to make nearly 4x its money with Flagstone sale

trailmix

Gryphon Investors is exiting Flagstone Foods after more than three years.

San Francisco-based Gryphon said Monday it is selling Flagstone Foods to TreeHouse Foods in a deal valued at $860 million. Flagstone, of St. Paul, Minnesota, provides branded and private-label healthy snacks to retailers across North America. The company said it holds a leading position in the trail mix and dried fruit category.

The Flagstone sale includes an earn-out, plus other features, that could cause the ultimate deal value to reach $890 million, a person familiar with the situation said.

Gryphon’s investment in Flagstone dates from November 2010. The PE firm at the time acquired two separate companies, Ann’s House of Nuts and American Importing Co, or Amport. The deal to buy both companies was valued at $250 million, peHUB reported at the time. The investment came from its third fund, Gryphon Partners III LP.

The PE firm is expected to make about 4x its money with the sale to TreeHouse, the source said. The sale is also expected to generate a nearly 50 percent IRR for Gryphon, the person said.

Gryphon, which targets mid-market companies, raised $415 million with its third buyout fund in 2006. In 2008, the firm deferred fundraising for Fund IV and instead raised $100 million with a bridge fund. The PE firm in October completed fundraising for a second bridge fund. Gryphon Partners 3.5 LP closed at $365 million, peHUB has reported.

Gryphon opted to do a second bridge fund instead of a larger Fund IV because firm executives did not want to be distracted from deals in a challenging fundraising environment, sister magazine Buyouts has reported. Fund 3.5 has a three-year investment period rather than the customary five or six years for larger funds.

Performance data for Gryphon Fund III was not available

Moelis & Company, Houlihan Lokey and BMO Capital Markets provided financial advice to Gryphon.

Photo courtesy of Shutterstock

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