Arbor expects to make 7x on Columbus Manufacturing

Arbor Investments stands to make 7x its money with the sale of Columbus Manufacturing Inc, a source said.

Hormel Foods said Oct. 31 it would buy Columbus Manufacturing for $850 million. Founded in 1917, Columbus makes artisanal salami and deli meats. The Hayward, California, company operates three plants where it makes products including finocchiona, Genoa and Italian dry salami.

Columbus’s annual sales were about $300 million with an expected growth rate of 5 percent, Hormel said.

Arbor acquired the company in 2012 from Endeavor Capital. The Chicago PE firm paid $213 million for Columbus, the source said. Arbor, which targets deals in the food and beverage industries, used its third fund to invest in Columbus. Arbor Investments III LP closed on $400 million in 2011.

The firm is investing out of its latest flagship fund, Arbor Investments IV LP, which raised $765 million.

Since 2012, Arbor has invested about $61 million in Columbus’s plants and equipment, the Chicago Tribune reported. It also overhauled the company’s senior management team, the story said. Columbus’s EBITDA doubled during Arbor’s ownership, the source said.

Earlier this year, Arbor put the company up for sale. The buyout shop targeted only strategics during the process and ended up selecting Hormel, sources said. Columbus sold for 18x EBITDA, the person said.

Hormel, the meat processor and food products specialist with a $16.6 billion market cap, said the addition of Columbus would add modestly to its earnings per share in fiscal 2018. Columbus will continue to operate in California and will report as part of Hormel’s refrigerated-food segment.

Columbus could not be reached for comment.

Barclays and Faegre Baker Daniels advised Hormel. B of A Merrill Lynch, DLA Piper, and Rothschild provided financial advice to Columbus.

Action Item: Contact Joe Ennen, Columbus’s CEO, at +1 510-921-3400

Photo of sliced salami courtesy of tolisma/iStock/Getty Images