Reports over the weekend suggest some of Europe’s top private equity firms are circling over the fresh food giant Bakkavor. The UK supplier of fresh prepared foods has previously announced it is looking to sell a set of shares in its business and the deal might be an interesting opportunity for private equity firms.
Sky News reported on the emerged private equity interest, saying that PAI Partners and Pamplona Capital are the two big buyout firms set to consider acquiring a stake in the fresh food giant.
Bakkavor is one of the most prominent companies in the UK. It provides customers fresh foods such as ready-meals, pizzas and desserts. Its customers in the UK include Mark & Spencer as well as Tesco. In the international level, it provides food for companies such as Burger King, Starbucks and Pret-a-Manger.
The private equity firms have so far declined to comment on the news. Bakkavor’s representatives have also remained quiet about any possible deal making.
Barclays Announces the Sale
Last August, Barclays was appointed to advise the UK company on a possible sale of the shares. The shares have been held by Icelandic banks ever since the financial crisis in 2008.
Arion Banki, an Icelandic bank, is in charge of 25% of the Bakkavor shares, which are now under sale. On top of this, it is reported that a further 12% is on sale by other Icelandic institutions, such as the Pension Fund of Commerce and the Gildi Pension Fund.
Some reports suggest around half of the shares are on sale and therefore, the buyer would become the majority owner in the company.
The company’s founders, Agust and Lydur Gudmundsson are currently in charge of 39% of shares. The reports suggest the Gudmundsson brothers are not going to let go of their shares in the company they set up a quarter of a century ago. Barclays is not advising the brothers during the process, as they are advised by Rothschild.
Last month, Bakkavor announced it’s selling Italpizza shares to Dreamfood, both local Italian companies. The company still had a 60% stake in the Italian company.
Restructuring the Firm
Bakkavor started a restructuring process of borrowings, which included debt-for-equity swap, in 2013. Ever since the company completed the process, it has performed very strongly.
It’s first-quarter results for 2015 showed the like-for-like revenue went up by 3%, with adjusted profit increasing by 15%. The Sunday Times’ recent Top Track 100 list featured the fresh food giant at fifth place. The Top Track 100 list compiles all of Britain’s biggest private food and drink businesses.
The company became one of UK’s biggest fresh food suppliers when it took over Geest in 2005. At the time, the Icelandic companies were aggressively expanding overseas.
The debt-fuelled shopping spree was enabled by Iceland’s banks, which eventually ended up in the meltdown of the country’s economy in 2008.
The coming weeks will show whether other PE firms highlight their interest in the company and whether a buyout firm will be able to gain the majority stake. As the company is such a renowned business, it wouldn’t be a surprise if other food giants get interested as well.