Palladium’s $1.56bn Fund V adds protein business to Quirch Foods

Palladium Equity Partners portfolio company Quirch Foods has acquired US animal protein distributer Colorado Boxed Beef from Altamont Capital Partners. Financial details were undisclosed.

The deal had been in the pipeline since the second half of 2019, confirmed Chris Allen, a partner at Palladium, but was delayed by the coronavirus pandemic before gathering pace again in May this year.

Capital was drawn from the firm’s flagship Palladium Equity Partners V, which closed on $1.56 billion in 2019. The fund pursues a strategy of investing in mid-market founder-owned businesses across the consumer and food, industrial, healthcare and business service sectors.

“We like to invest in businesses that have a number of growth-oriented tailwinds, operate in fragmented industries and that we can help grow organically and through consolidation,” Allen told Agri Investor. “We also like to invest in businesses that can benefit from the growth of the Hispanic and ethnic population – that is not necessarily evident in every business we invest in but it’s certainly a common theme.”

Fund V does not have a specific allocation to food sector investments, he added, favoring an approach of capturing opportunities as they present themselves. “But as you might suspect, we try to avoid being too concentrated in any one those four sectors,” he said.

Quirch is a distributor of protein and ethnic food products, operating a fleet of almost 500 refrigerated trucks supplied by 21 facilities. The company has a strong presence in south-eastern US states and counts the Caribbean, South America and Central America among its export markets.

Palladium invested into the business in 2018 because it had a “significant tailwind from both a product category perspective and on the consumer growth side as well [because of] the ethnic population increasing,” explained Allen.

The firm supported Quirch’s May acquisition of Butts Foods, another food distributor with a focus on the ethnic market in south-eastern states, while Colorado Boxed Beef “deepens their footprint in Florida and Georgia, expands it into Texas, the Mid Atlantic and the Pacific Northwest,” said Allen.

“If you think about the broadline distributors of the world, they don’t carry the same depth and breadth of protein as the protein distributors, so in many cases they have to buy from the Quirch and Colorado Boxed Beef types of companies. And Colorado sells a lot more into those folks than Quirch does,” he said.

Palladium knew Quirch was a “recession resistant” business because a large part of its customer base is made up of small supermarkets and independent chains, added Allen, and is proving to be “pandemic resistant” for the same reason too.

The firm has previously invested and exited its investments in US food companies such as Castro Cheese, potato chips producer Wise, and fruits and nuts brand Sahale Snacks, among others.

Palladium does not pursue a bespoke exit strategy with its consumer foods investments, said Allen, instead choosing to rely on its growth orientated play to attract suitors.

“We’re looking to transform [our companies], get them into new geographies, new product categories and new channels. And typically, when we do that, we’ve seen both a mix of strategics and private equity investors become pretty interested,” Allen said.