Private Equity Firms Show Interest for Refresco Gerber


December 8, 2014

Refresco Gerber, the company that bottles Innocent Smoothies and Del Monte juices, might be up for sale. The company is reportedly attracting bids from private equity giants such as Blackstone and KKR. This amidst rumours it might also be considering initial public offering (IPO).

Current Private Equity Backing
The Anglo-Dutch company is currently partly owned by the British private equity firm 3i and an Icelandic consortium. 3i acquired a 20% stake in Refresco in 2010, with Refresco merging with Gerber Emig last year.

The company has been looking at a sale since summer, The Telegraph reported on a Sunday afternoon, and it now seems that private equity firms are going to lodge official bids before Christmas. Both, 3i and the Icelandic consortium are looking for an exit in the company and are keen to sell to private equity.

But a South African financier, Manfred Gorvy, who owns part of Refresco Gerber, is not as eager. Gerber is set to retain a stake in the company even after the sale. It was in fact his company, Gerber Emig, which merged with Refresco earlier.

Market Conditions Caused IPO Appetite to Drop
Refresco Gerber was keen to float the company in the London stock exchange this summer. The Financial Times reported in June, how “buyout fund managers are rushing to tap into yield-hungry investors that have boosted stock markets to offload their stakes in companies through listings.”

But the difficult market conditions and numerous disappointing flotations meant the company put its IPO dreams to hold. JP Morgan advised the company on a possible sale during the summer. For now, it seems the company is more eager to sell, but IPO is still not ruled out.

Sale Details
So far, there aren’t many details on the possible bids. Reuters reported that Refresco Gerber is setting its sights on a £1.5 billion pound price tag.

A good valuation isn’t a surprise, considering the previous track record for the company. The company’s most recent reported earnings stand at £126 million, with profits of £9.5 million. This is up from the £7.8 million in the previous year.

Lure of Dual-Track Process
As mentioned above, appetite for IPOs has weakened in the previous months. The Telegraph quoted a banker telling the situation in the UK, with elections looming ahead and uncertainty over EU membership, is also causing companies to act. “There is a sense of urgency to get a company listing out ahead of May’s general election and potential political uncertainty that may weigh on investor sentiment,” he said.

This has led to companies looking at a sale and a float simultaneously. The so-called dual-track process has provided plenty of private equity firms with opportunities to seek great returns for their investments. Most recent example is United Biscuits’ decision to sell the Turkish food giant instead of a flotation.

But dual-track process doesn’t always guarantee good results for the company. An analysis in Mondaq claimed recently that, “success stories are rarer than failures”. It remains to be seen whether Refresco Gerger and its private equity backers can benefit from the strategy and ultimately, which route the company decides to take.

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