Bright Food eats Lion's Weetabix

China's Bright Food (Group) Co. Ltd. served itself a traditional British breakfast cereal on Thursday, May 3, announcing a deal to acquire control of Weetabix Food Co. from private equity owner Lion capital LLP for an enterprise value of £1.2 billion ($1.9 billion).

The agreement, which at last gives Bright Food a deal in Europe to match its earlier successes in Australia and New Zealand, is also a nutritious start to the day for Lion. The consumer products investor is expected to make about five times its original 2004 investment in Weetabix by the time it finally exits the company. For the moment, however, Lion and a Weetabix management team led by CEO Giles Turrell, are retaining a 40% share of the business. The exact terms have not been disclosed. But it is understood that Bright Foods will take 60% of Weetabix when the deal closes in the second half of 2012 and then acquire the remaining shares over the course of the next few years.

The transaction represents the largest overseas acquisition by a Chinese company in the food and drinks sector.

But for Bright Food it also represents an end to a long run of failed deals in Europe and North America. In February 2011 Shanghai-based Bright Food dropped out of the running for British cookie baker United Biscuits Ltd., owned by Blackstone Group LP and French private equity house PAI Partners. The private equity firms recently brought in Credit Suisse to find an alternative buyer. Bright Food also lost out when Blackstone walked away from a joint bid for Pittsburgh dietary supplements purveyor GNC Holdings Inc., which opted for a public listing on the New York Stock Exchange instead. And it was bested by General Mills Inc. in the race for PAI's 51% stake in French yogurt maker Yoplait SAS.

However, Bright Food has had better luck in the Southern Hemisphere, acquiring 75% of Australian foodmaker Manassen Foods Australia Pty Ltd. from local buyout firm Champ Private Equity last year and acquiring a 51% stake in New Zealand dairy operator Synlait Milk Ltd. in 2010.

The deal is still subject to regulatory and government approvals in China and elsewhere, but fits well with Bright Food's long-championed ambition of international expansion. Bright Food chairman Wang Zongnan has previously said he is aiming for 30% of the group's sales to come from overseas markets over the next few years.

Bright Food said Thursday that the deal supports its strategy of buying famous international brands, developing advanced technology and taking strong competitive positions in each of its markets. It also sees opportunities for growing the Weetabix brand in Asia, and particularly in China where there is a growing appetite for packaged and convenient healthy foods.

Bright Food is involved in farming, food manufacture and retail and distribution in China and Asia and generated revenue of $12.2 billion and Ebitda of $1.2 billion in 2011. Weetabix, of Kettering, England, is the U.K.'s no 2. branded cereal maker. Its brands include Weetabix - the country's top-selling cereal, with 2010 U.K. sales of £101 million - as well as the no. 1 muesli brand, Alpen. Weetabix also exports to about 80 countries, including about £2 million a year to China.

Founded in 1932, Weetabix was family-owned until the Lion buyout. It acquired Barbara's Bakery Inc., of Petaluma Calif, in 1986. The company posted sales of £423 million in 2010, the most recent year for which figures are available, and declared a gross profit of £146 million.

The amount of debt in the company today has not been disclosed and no further financial details of the Bright Food deal are available. Weetabix last year refinanced a reported £900 million of debt, built up following both the original buyout and dividend recapitalizations by Lion in the following years. However, net debt as of January 1, 2011 stood at £618 million. Lion Capital and Weetabix declined to comment on figures.

Bright Food was advised by Akeel Shachak and Robert Plowman of Rothschild in the U.K and Jennifer Yu of Rothschild in China. It took legal counsel from Clodagh Hayes and Richard Gu of Linklaters LLP. Mike Francies and Tony Wang of Weil, Gotshal & Manges LLP provided legal advice to Lion Capital.