PE Hungers for Food & Beverage

Private equity has long put food retailers, restaurants and ingredients manufacturers at the top of the menu, more recently spurred on by the healthy eating fad, while trade buyers have a particular fascination for eating out and public houses.

The buyouts of bakery group Vaasan & Vaasan and patisserie chain Druckers Vienna Patisserie this week highlight how private equity firms have long dined out on assets in the food and beverages sector. Lion Capital paid an undisclosed sum for the Finnish and Baltic-based bake-offs business, adding it to a portfolio track record containing recently sold French jam manufacturer Materne and recently added European soft drinks division of Cadbury Schweppes (in lieu with The Blackstone Group), now renamed Orangina.

Risk Capital Partners, meanwhile, will be merging Druckers with its London-based Patisserie Valerie chain, although the two will maintain their current brands. Risk Capital Partners is also currently invested in the Giraffe restaurant chain, and exited its investment in Signature Restaurants, owner of The Ivy, Caprice and Strada restaurants, in 2005. Today (31 May), Blackstone's Tragus bought Strada for Gbp140m.

Referring to the Vaasan & Vaasan investment, Lion Capital's founding partner Lyndon Lea spoke of the opportunity to invest in a “range of well-recognised and trusted brands that enjoy strong market positions and are on-trend with consumer preferences for healthier eating”.

The healthy eating trend has not been lost on private equity as consumers increasingly look to organic and conscience-friendly products. Hick Muse Europe, Lion Capital's former moniker before separating from US buyout firm Hicks, Muse, Tate & Furst (itself rebranded as HM Capital after founder Tom Hicks departed for pastures new, or at least Liverpool Football Club) bought health conscious breakfast cereal Weetabix for Gbp642m in 2003.

The same year, UK mid-market firm Montagu Private Equity bought Marlow Foods, owner of the Quorn brand, for Gbp60m, generating a healthy 4.5 times return in its sale two years later to trade buyer Premier Foods for Gbp172m. Also in 2005, global private equity firm 3i sold cereal bar maker Halo Foods to Glisten and Braes Group, a fruit and vegetable extracts business, to Spain's Natraceutical. In 2006, Gresham Private Equity generated an impressive sixfold return on the Gbp86m sale of UK health food supplier Whitworths to European Capital.

Following its successful acquisition of Burton's Foods in March of this year