Arbor’s sale of Rise Baking is said to hit second round

Arbor Investments’ sale of Rise Baking Co is heating up.

The auction is in the second round, with private equity firms and strategics vying for the Minneapolis baking company, three sources said.

Final bids have not been set but are expected in early summer, one source said. Arbor has received north of 10 proposals for Rise Baking, this person said. “They’re trying to narrow the group down,” the source said.

Rise Baking is projected to produce $50 million Ebitda for full-year 2018 and is expected to sell for $600 million to $700 million, people said. Harris Williams and Evercore are advising on the sale, sources said.

Arbor Investments used a rollup cookie strategy to form Rise Baking.

In 2013, Arbor acquired New French Bakery Inc of Minneapolis, which makes and markets par-baked and fresh artisan breads. (New French appears to be Arbor’s first buy for its Le Petit Pain Holdings LLC platform.)

A year later, in 2014, Arbor scooped up Best Maid Cookie Co, which makes private-label gourmet cookies and dessert bars that come fully baked or in frozen-dough form.

In 2015 the PE firm gobbled up Hudson Baking Co, which supplies marshmallow crispy dessert bars, brownies, cookies and other baked goods. And in 2016 Arbor added South Coast Baking LLC, which makes frozen cookie dough.

The strategy helped turn Rise Baking into a $300 million-plus cookie powerhouse, said in 2017.

Some sponsors who passed on Rise Baking questioned whether the company has truly integrated its acquisitions, one banker said. “Rise Baking isn’t trying to grow Ebitda through cost-cutting but through growth,” the first source countered.

The sale comes just weeks after Riverside Co agreed to sell Tate’s Bake Shop, which makes cookies and baked goods, to Mondelez International for about $500 million. Riverside in late 2017 also invested in Parker Products, which makes specialty ingredients for food and beverage companies.

“Arbor wants to capitalize on the baked-goods-sector momentum,” a second banker said.

Arbor, Chicago, invests in the food-and-beverage industry. The firm has experience in the bakery space. Arbor invested in Gold Standard Bakery, which makes croissants and danishes, in 2008. It sold Gold Standard in 2015, making 9.4x its money, Buyouts reported.

The PE firm is currently investing out of its fourth flagship, which closed on $765 million in 2016. Arbor’s inaugural debt fund also raised $125 million that year.

Executives for Rise Baking, Arbor, Harris Williams and Evercore could not be reached for comment.

Action Item: Contact Rise CEO Michael Schultz at +1 612-455-7500

Photo courtesy of Dan Meshkov/iStock/Getty Images