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Blackstone, PAI contemplate snacks disposal

by Jonathan Braude in London | Published March 13, 2012 at 2:48 PM

Private equity firms Blackstone Group LP and PAI Partners SAS have appointed Credit Suisse Group to work on a potential sale of the salty snacks arm of their cakes-to-peanuts business United Biscuits Ltd. in a process that could fetch as much as £500 million ($784 million).

However, a source stressed Tuesday, March 13, that the co-owners had taken no final decision to sell the business separately from its immediate parent company and that any auction would be unlikely to begin for several months.

The United Biscuits business is one of several food assets coming on the block or changing hands. Premier Foods plc, 15.8% owned by private equity firm Warburg Pincus, is shedding unspecified businesses to focus on eight "power brands."

St. Albans, England-based Premier said Monday it would continue disposals following a refinancing package agreed with its 28 lenders, which extends £1.2 billion of banking facilities from December 2013 to June 2016 and resets its covenants to reflect a slimmed-down brand portfolio. Last year Premier Foods sold its Quorn and Cauldron meat-free brands to Exponent Private Equity LLP and Intermediate Capital Group plc for £205 million; its canned foods division to Mitsubishi Corp.'s Princes Ltd. for £182 million; and its RF Brookes chilled foods unit and Avana Bakeries to 2 Sisters Food Group for £30 million.

Meanwhile, The Wall Street Journal reported Monday that Oaktree Capital Management LP hired Barclays Capital to help it sell R&R Ice Cream plc of Northallerton, England. And in Australia, Modern Bakery Co., a consortium of local investors and company management, has bought the country's fourth-largest cookie baker, Unibic Australia Pty. Ltd., out of bankruptcy administration for an undisclosed price. Melbourne-based Unibic makes the famous Anzac Biscuits, baked to celebrate Anzac Day, which commemorates Australian and New Zealand losses in World War I.

Oaktree created R&R in 2006 by merging Richmond Foods plc with private-label food maker Roncadin SA, which it had bought a year earlier. In 2010 the business acquired Rolland -- France's third-largest ice cream manufacturer -- and added Pilpa SAS in September 2011 for €27 million ($35.4 million). In December R&R agreed to buy Germany's Durigon Gelato GmbH for an undisclosed sum.

Oaktree, of Los Angeles, declined to comment and Barclays Capital could not immediately be reached. R&R had net debt of €546 million as of the end of September, and reported Ebitda for the nine months to Sept. 30 of €59.8 million on revenue of €406.6 million.

Blackstone and PAI's attempt to sell the United Biscuits snacks division comes a full year after a previous attempt to sell the whole company for more than £2 billion crumbled when China's Bright Food Group Co. Ltd. withdrew from the process. Bright Food had made a pre-emptive bid for the maker of Jaffa Cakes and McVitie's Digestives, ahead of what was originally expected to be an auction led by J.P. Morgan Chase & Co. and Goldman Sachs Group Inc. The auction was never formally launched, and in February 2011, the owners decided to keep London-based United Biscuits.

The baking division won the prestigious contract to make the cake for the wedding of Prince William and Kate Middleton later that spring and is now unlikely to be put on the block before 2013. United Biscuits' salty snacks arm makes potato chip brands including Hula Hoops, as well as KP Nuts.

Blackstone and PAI acquired United Biscuits in 2006 from British peers Cinven Ltd. and MidOcean Partners LP. PAI had led the original buyout and already owned roughly 40% of the company. It increased its stake to invest on an equal footing with Blackstone in a deal with an enterprise value of £1.6 billion, equivalent to $3 billion based on exchange rates in October 2006.

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