Private equity firms Partners Group Holding AG (PGHN.S) and Charlesbank Capital Partners LLC are nearing a deal to acquire Hearthside Food Solutions LLC, a U.S. contract manufacturer used by food and drink companies such as Kellogg Co (K.N) and PepsiCo Inc (PEP.O), for more than $2.4 billion, including debt, two people familiar with the matter said on Sunday.
The deal reflects the U.S. food manufacturing outsourcing sector’s appeal to private equity firms. Major food and drink companies turn to contract manufacturers such as Hearthside to cut production costs and boost their profitability.
The consortium of Partners Group and Charlesbank outbid other private equity firms in the auction for Hearthside, and is negotiating final terms with the company’s existing owners, Vestar Capital Partners and Goldman Sachs Group Inc’s (GS.N) private equity arm, the sources said.
Partners Group and Charlesbank have agreed to pay the equivalent of about 11 times Hearthside’s 12-month earnings before interest, taxes, depreciation and amortization, the sources added.
If the negotiations are completed successfully, a deal could be announced as early as Monday, the sources added, cautioning there was always a possibility that talks fall apart at the last minute.
The sources asked not to be identified because the deal discussions are confidential. Vestar and Goldman Sachs declined to comment, while representatives for Partners Group, Charlesbank and Hearthside did not immediately respond to requests for comment.
Hearthside produces baked foods and snacks, including energy bars, cookies and pretzels, out of 24 manufacturing facilities in the United States and Europe for the world’s premier food companies, according to its website.
The company, based in Downers Grove, Illinois, was created in 2009 by private equity firm Wind Point Partners and Rich Scalise, a former Ralcorp Frozen Bakery Products president and veteran of ConAgra Foods Inc (CAG.N). Scalise now serves as Hearthside’s chairman and chief executive officer.
Goldman Sachs and Vestar acquired Hearthside for $1.1 billion from Wind Point in 2014. Hearthside has since acquired other companies, including Standard Function Foods Group last year.
Source: Reuters.com