Palladium Equity Partners has recapitalised two portfolios companies from its third fund – including canned food company Teasdale Quality Foods that has already returned 1.1x the firm’s original investment, according to sources in the market and a statement from the firm.
Palladium, which is in the market raising its fourth fund targeting $800 million, distributed about $58 million to limited partners in Fund III from the dividend recapitalisations of Teasdale and ABRA Auto Body & Glass, which provides vehicle damage repair services, the firm said in a statement. Financial details of the transaction were not available.
The firm, led by Marcos Rodriguez, continues to be majority owner in both companies.
Palladium acquired Teasdale for more than $40 million in 2011, including initially $23 million of equity. Two add-on acquisitions grew the company and boosted the firm’s equity stake in the company to about $38 million. The dividend recapitalisation has allowed Palladium to return $34 million to LPs, while retaining an about 80 percent ownership stake in the company.
When you double or triple EBITDA, it doesn't matter what the debt markets are like.
Teasdale has more opportunity to expand, whether through organic growth or additional acquisitions, Rodriguez told Private Equity International Wednesday.
“We think there’s still tremendous runway to increase [earnings before interest, taxation, depreciation and amortisation),” Rodriguez said.
Meanwhile, Palladium returned $24 million to LPs from the recapitalisation of ABRA, which it initially acquired for more than $100 million, including debt. The firm used about $55 million of equity in the deal.
ABRA has been expanding since Palladium’s investment, completing 10 add-on acquisitions and increasing EBITDA by more than 80 percent, the firm said.
The two recapitalisations are “emblematic” of Palladium’s strategy, Rodriguez said.
“In Teasdale and ABRA, it’s not that the market was frothy, it’s that we under-leveraged the businesses at acquisition, we had an operating plan we executed on … when you double or triple EBITDA, it doesn’t matter what the debt markets are like,” he said.