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Church’s Chicken Selling To Friedman Fleischer – Source

Arcapita has agreed to sell restaurant operator Church’s Chicken to Friedman Fleischer & Lowe, according to a source close to the situation.

The deal, advised on the sell side by Bank of America, represents a rare exit of a stable, growing company. Church’s Chicken has annual revenues that have grown between 8% and 10% through the recession as consumers trade down to less expensive dining.

Within the past two weeks, San Francisco-based Friedman Fleischer was selected as the winning bidder from an auction that started with as many as ten buyout suitors, the source said. In April peHUB reported the sellers had narrowed the bidding pool to three or four parties. At the time, Atlanta-based Arcapita was seeking a full valuation of up to 8x Ebitda for the company.

The current deal, scheduled to close in early July, is valued at greater than $300 million. An exact price could not be determined. Arcapita purchased Church’s Chicken in 2004 for $390 million from AFC Enterprises, the parent company of Popeye’s Chicken. The company has greater than $1 billion in revenue and more than 1500 locations, 400 of which are international.

Even if the price is ultimately less than Arcapita’s entry price, the firm could still mint a return on the investment between sale-leaseback and financial leverage. The firm contributed just 20% equity to the original deal.

Church’s Chicken’s Capital structure under Friedman Fleischer & Lowe will be slightly more equity-heavy. Bank of America will join two other co-lead arrangers to put up debt worth roughly 40% of the transaction, in addition to a revolver. The deal will use no seller financing from Arcapita, as was previously expected.

Arcapita, formerly known as Crescent Capital Investments, does not have a traditional fund structure, although an exit on a company like Church’s Chicken may give it the track record it needs to raise one in difficult times. A year ago, Buyouts reported that Arcapita was considering raising a traditional LBO fund backed by investors based in the United States. Currently the firm’s buyout arm uses its balance sheet to finance equity investments. Arcapita then places the equity directly with a group of wealthy investors in the Middle East, primarily in Bahrain.

Arcapita declined to comment. Friedman Fleischer was not available to comment.

Previously: Take-Out: Arcapita Selling Church’s Chicken