KPS toasts 9x brewery exit

North American Breweries will be sold for $388m, representing a 9x overall return, shortly after the sale of auto-parts maker HHI Group, which KPS was selling for a 10x return.

It’s not too much of a stretch to say that KPS Capital Partners is on fire right now.

The firm has followed up its announced sale earlier this month of auto parts manufacturer HHI Holdings for $750 million — and a 10x overall return — with the announcement Friday of the sale of its North American Breweries platform – and a 9x overall return.

North American Breweries, a platform KPS first began to develop in 2009, will be sold to Cerveceria Costa Rica, a subsidiary of Florida Ice and Farm Company, for $388 million. The 9x overall return includes proceeds from this sale as well as a recapitalisation KPS completed in 2009, according to a person with knowledge of the firm.

The firm declined to discuss financial details of the transaction.

“In forming [North American Breweries], KPS did not buy or invest in a company; rather, we created a new company that became one of the largest and fastest growing independent beer companies in the US,” Raquel Palmer, a partner at KPS who lead the deal, said in a statement.

In forming [North American Breweries], KPS did not buy or invest in a company; rather, we created a new company that became one of the largest and fastest growing independent beer companies in the US.

Raquel Palmer

Palmer talked to Private Equity International about North American Breweries in an exclusive interview last year.

KPS made its debut investment in the beer and malted beverage sector in February 2009 by acquiring the High Falls Brewing Company, which made the Genesee and Dundee brands, and Seagram’s Escapes. Genesee was a long-lived, 154-year old company that had declined in recent years and hadn’t received investment from its management in some time.

Soon after, KPS acquired Labatt USA from Anheuser-Busch/InBev, and added Burlington, Vermont-based Independent Breweries United. The resulting company, North American Breweries, has held several popular brands of beer, including Pyramid, Magic Hat, and launched new products, including Labatt’s lime-flavoured beer, Blue Light Lime. “I actually love it,” Palmer said during the interview. “It’s great by the pool.”

The brewery investment is from the firm’s third fund, which closed on $1.2 billion in 2009, but was re-opened to existing investors who committed another $800 million to boost the fund total to $2 billion. Fund III was generating a 1.26 percent total value multiple as of 31 August, 2012, according to information from the New Jersey Division of Investment, an LP in the third fund.