THL to make 2.2x its investment with Fogo de Chao IPO

Thomas H. Lee Partners LP stands to more than double its money once Fogo de Chao Inc goes public.

The Brazilian steakhouse plans to price its offering on June 18 and start trading the next day, a source said. Fogo is offering 4.4 million shares at $16 to $18 each via book runners Jefferies and JP Morgan.

THL owns 92 percent of Fogo and has no plans to sell shares in the IPO. At $17 a share, THL stands to make $379.5 million in paper gains, or 2.2x its money.

THL acquired Fogo de Chao in July 2012 in a deal valued at $400 million. The THL-led group invested $172.1 million equity into the deal, SEC filings indicate. Since being sold to THL, Fogo de Chao doesn’t appear to have paid out any dividends.

Fogo de Chao plans to use proceeds from the IPO to pay off debt. The company has $314 million in total liabilities, which includes about $238 million in long-term debt.

Founded in 1979 in Brazil, Fogo de Chao — which means “campfire” or “fire on the ground” in Portuguese — specializes in fire-roasting meats using a centuries-old Southern Brazilian cooking technique called churrasco. The Dallas-based company currently operates 26 restaurants in the United States, 10 in Brazil and one in Mexico.

Fogo de Chao is profitable. Revenue rose nearly 20 percent to $262.3 million in 2014. Income also rose to $17.3 million for the year, up from $937 million in losses in 2013, according to a June 8 regulatory filing.

THL’s investment came from its sixth fund, which closed at $8.1 billion in 2007. The pool is producing a 6.9 percent net IRR and a 1.4x investment multiple as of Sept. 30, according to the California Public Employees’ Retirement System.

THL is fundraising for its seventh pool, which has a $3 billion target, and has drawn $1.5 billion in commitments so far, PE HUB sister publication Buyouts reported in March.

Executives for THL and Fogo de Chao declined comment.

Photo courtesy of Fogo de Chao