Bain Capital sells Brakes Group in $3.1bn deal

US alternative investment firm Bain Capital has exited its majority share investment in Brakes Group, selling it on to US food distributing giant Sysco.

US alternative investment firm Bain Capital has sold food supplier Brakes Group to US food distribution giant Sysco in a deal worth $3.1 billion (£2.2 billion; €2.81 billion). Bain bought a majority share in Brakes for €1.3 billion in 2007.

Brakes chief executive Ken McMeikan said that until mid-February, the group had still been considering an IPO for the company, according to reports.

Brakes supplies food to caterers such as pubs, hospitals and schools in the UK, Ireland, France, Sweden, Spain, Belgium and Luxembourg.  Bain Capital managing director Dwight Poler said in a statement that transformations made under their leadership included the creation of an e-commerce platform as well as enhancing the group’s multi-temperature distribution infrastructure.

Food e-commerce is a growing area of activity in food and food investment. Excluding restaurant deliveries, food e-commerce made up the largest tranche of agtech investment by volume last year, with $1.65 billion raised by food e-commerce start-ups, equivalent to 36 percent of total of agtech funding in 2015, according to AgFunder’s Agtech Investing survey.

Sysco initially bid for Brakes when private equity firm Clayton Dubilier & Rice put the company up for sale in 2007, but left the bidding early against competition from several private equity groups including Bain Capital, CVC Capital Partners and Cinven. It eventually sold to Bain Capital for around €1.3 billion. Bain specialises in private equity, venture capital, credit products and absolute return investments.

Brakes’ earnings before interest, taxes, amortisation and debt grew by 17.71 percent between 2011 and 2014, to £150.2 million. It had been £141.3m ($163.1 million; €160.5 million) in 2010, but took a dive because of difficult market conditions and volume decline, according to Brakes’s annual return for 2011.

A Rabobank report looking at falling food prices last year said that the benefits were being slowly passed up the value chain to consumers, first benefiting processors and distributors in developed countries. It also said that lower food prices might help some food businesses expand in terms of scale.

“From a demand perspective, Rabobank expects the biggest volume increase to be through upmarket food and beverage consumption such as foods services, wine and spirits, beef and pork, exotic fruits and fruit juices,” according to the report.

A Brakes spokewoman said that they could not comment on how the value chain and commodity prices had affected their business during Bain Capital’s tenure of the company.

She said: “In terms of the main benefits of having a private equity investor, Bain Capital has […] invested more than £100 million into the business [in an] e-commerce platform, depots, customer centres and multi-temperature [distribution], as well as a huge amount time on the ground to provide strategic and operational support. They have supported investment in continued acquisitions in the UK, France and Sweden during this time.”

Bain closed its its third Asia-focused fund, Bain Capital Asia Fund III on its hard-cap of $3 billion in December 2015.

Bain Capital seeks to invest in seed, start-up, early to late stage, growth capital, emerging growth, corporate divestitures, spin-offs, management buyouts, industry consolidations, and family/founder situations, according to PEI Research & Analytics. It has investments in the information technology, communications, healthcare, industrial and manufacturing, business services, retail and consumer products, and finance sectors.