L Catterton to make more than 4x its money on Cholula

The PE firm sold the hot sauce brand to McCormick after a less than two-year hold.

L Catterton is poised to make more than 4x its investment on the sale of Cholula hot sauce, a source close to the deal told PE Hub.

The consumer-focused private equity firm on Tuesday announced the sale to spice and flavorings maker McCormick & Co for $800 million in cash.

The exit marks a relatively short hold for L Catterton. The firm bought the Jalisco, Mexico sauce maker in a carve-out in April 2019 through its flagship buyout fund and L Catterton Latin America.

The deal, which is expected to close this year, bulks up McCormick’s market share in the hot sauce category. The publicly traded company already owns iconic brands like Frank’s RedHot and French’s mustard, both of which it inherited in 2017 through its $4.2 billion purchase of Reckitt Benckiser’s NA food division.

The Hunt Valley, Maryland-based buyer capitalized on the pandemic fueled increase in consumer demand to eat at home. The hot sauce product segment has grown by 24.6 percent since November last year, according to Nielsen data.

“Hot sauce is an attractive, high-growth category and, as an iconic premium brand, Cholula is outpacing category growth,” McCormick president and CEO Lawrence Kurzius said in a statement. The company’s net sales have been roughly $96 million per year and are expected to grow mid-to-high single digits in a post-pandemic world.

L Catterton, based in Greenwich, Connecticut, has approximately $20 billion of equity capital across seven fund strategies.

Most recently, the firm held a final close on L Catterton Growth IV, its fourth consumer-focused growth equity fund. The $641 million vehicle, which surpassed the target size by $16 million, will invest in North American mid-market consumer businesses.

Houlihan Lokey and Morgan Stanley are Cholula’s financial advisors on the deal. Kirkland & Ellis is providing legal advice to L Catterton and Cholula.