LBO France passes PAI foie gras business

LBO France is selling its 33% stake in Labeyrie – one of the world's largest producers of foie gras – to rival Paris-based buyout firm PAI, making a 1.7x return on its investment.

Pan-European firm PAI Partners is set to bolster its food-related portfolio with the purchase of one of France’s largest producers of fois gras, Labeyrie.

The deal, financial details for which have not been disclosed, gives the business an enterprise value of  €590 million and provides a 1.7x exit for fellow Paris-based private equity firm LBO France, according to a source close to the matter.

PAI and LBO France declined to comment.

Founded in 1946 in Bordeaux, the company’s premium products include mainly foie gras, smoked salmon and spreads. In the fiscal year ending June 2013, LFF achieved a turnover of €757 million.

Following the deal, PAI and existing shareholder Lur Berri, a French corporate, will hold equal stakes in Labeyrie alongside the management team, according to a statement.

The divestment will yield LBO France a 1.7x return and an internal rate of return of close to 25 percent, the source said. LBO France invested in the business in January 2012, when it acquired a 33 percent stake using its White Knight VIII fund, which is now fully invested. In March, it refinanced Labeyrie with a €275 million high yield bond issuance that enabled the firm to return a dividend of €60 million to LPs. Demand for the high yield bond issuance was €4.6 billion, approximately 15x higher than the issuance, Private Equity International reported at the time.

LFF, which has 15 plants of which 13 are based in France, also distributes its products in the Benelux region, Switzerland, Italy and in more than 40 other countries. In the fiscal year ending June 2013, LFF achieved a turnover of €757 million.

LBO France has supported the business in its organic growth and also assisted with a number of add-on acquisitions, Thomas Boulman, a partner at LBO France, told PEI.

LBO France will be keen to return money to investors as it is currently in market attempting to collect €1 billion for its successor fund, White Knight IX. A number of LP commitments are understood to have been made. It is expected that the firm, which declined to comment on fundraising, will hold a €300 million first close in the summer, PEI reported earlier.

For PAI, this will be the fourth transaction from the firm’s Fund VI, which is currently in market attempting to raise €3 billion. The fund is expected to hold a €2.5 billion second close by the summer, PEI revealed recently, having held a €1.4 billion first close in January.

In April, PAI agreed to acquire a majority stake in Euro Media Group (EMG), a production business based in France, for just under €200 million. In the same month, PAI and The Carlyle Group entered into exclusive talks with French-based Schneider Electric to acquire its business unit Custom Sensors & Technologies. The pair will pay about $900 million for a majority stake in the business, PEI reported at the time.

Reporting by Yolanda Bobeldijk