VMG seals 3x return on Pirates Booty

The consumer-focused firm has agreed its second exit in less than a month, selling Pirate Brands to B&G Foods alongside an investor group including Driven Capital Management.

VMG Partners will sell snack foods company Pirate Brands, maker of all-natural puffed corn and rice snack Pirates Booty, to B&G Foods for $195 million.

VMG declined to disclose a return multiple for the transaction, but a source with knowledge of the situation said the deal will more than triple the firm’s original investment. Consumer-focused VMG is exiting the company alongside a group of investors including Driven Capital Management, the family office of Vitamin Water co-founder Mike Repole. VMG and the co-investors acquired a majority stake in Pirate Brands in 2008, investing from VMG’s debut fund that collected $325 million in 2007.

“Right now I think it’s a rather robust time for smaller brands looking for strategic buyers,” VMG managing director Michael Mauzé told Private Equity International. “Strategic buyers have a lot of cash on their balance sheets and they’re looking for growth.”

B&G Foods projects that Pirate Brands will generate annual sales between $80 million and $90 million and adjusted earnings before interest, tax, depreciation and amortisation between $18 million and $20 million after the company becomes “fully integrated” into B&G, according to a statement.

Under VMG’s ownership, Pirate Brands experienced “tremendous sales growth” thanks in part to a number of improvements VMG helped implement related to the marketing, sales and packaging of the company’s products, according to Mauzé.

The sale of Pirate Brands comes less than a month after VMG agreed to sell pet food company Natural Balance to Del Monte Foods. The exits are VMG’s first of 2013 and both come from the firm’s Fund I, which now has six existing portfolio companies.

“We try to invest in two or three [companies] a year and exit two or three a year,” Mauzé said.

VMG’s Fund II closed on its $375 million hard-cap in June of 2011. The fund is less than 50 percent invested.

California-based VMG was launched in 2005 when five of VMG’s current partners spun out of private equity firm The Shansby Group.