Sun Capital reaps 190% IRR in coffee exit

Sun Capital sold a part of its investment in Timothy's Coffees of the World to Green Mountain for $157m.

Sun Capital Partners has exited a portion of its investment in Timothy’s Coffees of the World to Green Mountain Coffee Roasters for $157 million, reaping an IRR of around 190 percent in little over a year and a half.

Sun Capital acquired Timothy's Coffees in March 2008 and had about $20 million invested in the company.

Sun Capital is selling Green Mountain the distribution side of the business, which supplies specialty coffees to offices, hotels, grocery stores, retailers and food service establishments throughout Canada and the US.

Timothy’s Coffees also runs 139 restaurants all through Canada under the names Timothy’s World Coffee, Michel’s Baguette Bakery Café, Levain Bakery and mmmuffins brands. The restaurant franchise of the business is being sold to a Sun Capital portfolio company, Bruegger’s Enterprises, that operates fast, casual neighbourhood bakery-cafes in 24 states.

Bruegger’s acquisition of Timothy’s restaurant business will expand the portfolio company’s business into Canada, adding new distribution channels for Bruegger’s “New York-style” bagels.

Sun “invested prudently to grow Timothy’s with new product lines, greater production capacity, improved systems and expanded distribution”, according to Steve Liff, senior managing director with Sun Capital.

At the time of the acquisition, Timothy’s “needed some focus and attention and investment”, a source told PEO.

Sun acquired Timothy’s using capital from its fifth fund, which closed on $6 billion in 2007. The firm recently agreed to allow LPs in the fifth fund to shrink commitments, with the goal of reducing the overall total of the fund to $5 billion.