THL Selling Michael Foods for $1.7 Billion to Goldman Sachs

NEW YORK (Reuters) – Goldman Sachs Group Inc’s (GS.N) private equity unit is to buy food supplier Michael Foods from private equity firm Thomas H. Lee Partners THL.UL in a deal valued at $1.7 billion, Michael Foods said in a press release on Friday.

THL, which invested in the eggs and refrigerated potatoes supplier in 2003, will retain a 20 percent ownership in the company, Michael Foods said.

Boston-based THL will make a return on Michael Foods of more than three times its original investment through the sale to GS Capital Partners, a source familiar with the matter said on Friday.

As the financing markets and economy have improved over the past year buyout firms have been increasingly able to strike deals again.

THL Partners was among a consortium which was in recent talks to buy Fidelity National Information Services Inc (FIS.N) for $15 billion. Those talks fell apart over price, but the buyout firms had managed to get financing to support a deal.

THL had previously tried to sell Michael Foods in 2007, sources told Reuters at the time.

Private equity firms typically try to exit investments 3-5 years after investing, but the credit crisis and recession meant a lot of exits have taken longer.

GS Capital Partners is currently investing its sixth global fund, a $20.3 billion fund called GS Capital Partners VI, according to its website.

The bank’s private equity unit is the biggest in the world according to a recent study by Private Equity International magazine, which focused on the amount each buyout firm raised over five years. It has investments in companies such as Energy Future Holdings Inc, the former TXU.

THL has investments in companies including coffee and doughnut chain Dunkin’ Brands, radio and outdoor advertising firm Clear Channel and payment services firm MoneyGram International.

BofA Merrill Lynch (BAC.N) advised Michael Foods and THL while Goldman Sachs advised GS Capital Partners. Those banks also provided commitments for debt financing for the deal.

THL and Goldman Sachs declined comment.

(Reporting by Megan Davies; Editing by Robert MacMillan, Phil Berlowitz)