Compass Diversified acquires hemp-based food producer

This is Compass Diversified's third acquisition in the past 11 months and the first acquisition made in agribusiness.

Compass Diversified Holdings, a private equity firm focused on mid-market businesses, plans to acquire Manitoba Harvest, a manufacturer of branded, hemp-based food, whose products are carried in about 7,000  stores across North America, according to a press release. This is the firm’s first agribusiness investment.

The transaction is expected to close in the next 45 days and the deal is valued based on a total enterprise value of C$132.5 million ($107.38 million; €95.41 million). The acquisition will give Compass Diversified 87 percent equity ownership in Manitoba.

“Consistent with our previous platform acquisitions of leading branded consumer businesses, Manitoba Harvest possesses several qualities critical for success. Specifically, the company is a leader that operates in a large and expanding marketplace, has strong and growing cash flows, a passionate consumer following, an experienced management team and compelling expansion opportunities,” Alan Offenberg, chief executive of Compass Diversified, said in a statement.

For the year ended 30 November 2014, Manitoba reported net revenue of around C$37.9 million an increase of 23.9 percent year-on-year. For the six months ending 31 May, Manitoba generated net revenue of approximately C$27.6 million.

Manitoba’s chief executive Mike Fata existing shareholder White Road Investments and a few other management team members will re-invest in this deal.

“With Compass’ proven history of supporting and growing niche market leaders, we are confident that we can further grow market share and continue to offer new innovative hemp-based food products to our customers,” Fata noted in a statement.

A publicly-traded company, Compass Diversified is a private equity firm specialising in acquisitions, buyouts, and middle market investments. According to Compass, an ideal acquisition candidate for the firm will be an US based company that has low technological and/or product obsolescence risk, a diversified customer and supplier base, a management team with good track record, and one that generates a minimum EBITDA of $8 million.

According to the press release, Lazard Middle Market acted as the  financial advisor to Manitoba.