Franco-Canadian buyout firm Sagard has entered exclusive negotiations with US foods group Sara Lee over the sale of French refrigerated dough-maker EuroDough, following an auction process managed by Rothschild, the buyout firm said in a statement.
Sagard will pay €115 million for the business, according to Sagard partner Antoine Ernoult-Dairaine. The firm will fund the buyout with a €60 million debt financing package arranged by HSBC and Natixis, split between €40 million of senior debt and €20 million of mezzanine, Ernoult-Dairaine said. The purchase price represents a 6x multiple to the company’s earnings before interest, tax, depreciation and amortisation.
Capital for the deal comes from Sagard II, the firm’s €808 million 2006 vintage buyout fund. Once the deal completes, it is understood the fund will be about 65 percent deployed. A source close to the firm said the fund’s investment period concludes at the end of 2012, making a return to market with a new fund likely in the second half next year.
If successful, the EuroDough deal will be Sagard’s first new investment for almost 18 months,during which time the firm focused instead on realising investments.
It sold its first fund’s majority stake in equipment rental group Kiloutou to peer PAI Partners in April, netting a 6x return, but then re-invested in the business using its second fund for a minority stake. All other deal activity at the firm since its June 2010 investment in veterinary pharmaceuticals group Ceva Sante Animale has been on the exit side.
It sold aerospace connectors company Souriau to trade buyer Esterline Technologies last month, and hedge fund of funds manager Olympia to Richmond Park Partners in February.
EuroDough is headquartered in France but has operations in Belgium, Denmark, Italy, Germany, Netherlands, Portugal and Sweden, according to Sagard’s statement. In the fiscal year 2011, it generated net sales of €135 million.
The buyout is subject to regulatory and works councils’ approvals but is expected to complete in 90 days, it said.
Ernoult-Dairaine told Private Equity International EuroDough had three avenues for growth: “It can expand its geographic reach to markets which at the moment are poorly penetrated; we will also back the launch of new products, many of which have been kept back from the market under Sara Lee’s ownership; and finally we will consider new acquisitions. There are still a number of smaller competitors in the market, and to reduce transport costs is makes sense to have production facilities in target markets abroad.”