Deals

SJ Partners sees potential in ‘fragmented’ food service distribution

SJP CEO Scott Johnson told Agri Investor that the acquisition was predicated both on the New England distributor’s reliable revenue streams and the fragmented nature of the foodservice industry.

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Scott Johnson

SJ Partners has teamed up with RLJ Equity Partners to buy a majority stake in Native Maine Produce (NM) and Specialty Foods, Maine’s largest fresh foodservice distributor.

SJP CEO Scott Johnson told Agri Investor that the acquisition was attractive due to New England distributor’s reliable revenue streams and the fragmented nature of the foodservice industry.

“We like food service distribution because it remains relatively fragmented while so many other sectors have become very concentrated,” he said.

Scott Johnson
Scott Johnson

The top 10 players account for $91 billion of the food service distribution industry’s $268 billion in revenues, or just one-third, based on data from US Foods’ filings with the US Securities and Exchange Commission.

Native Maine has a dedicated, 1500-plus-strong New England customer base and more than 3,000 items in stock. Johnson said the company buys from over 50 local farms and food companies.

“If you’re in the right niche and have high levels of service, that equates to strong customer loyalty,” he said. “As a result, Native Maine has low customer turnover and consistent revenues.”

SJP, a lower middle market private equity firm in business for 15 years, has traditionally focused on the acquisition of consumer and services companies, with average hold periods of five years, often teaming with operating partners, including John Lunde, former head of Alliant Northeast. Lunde is joining Native Maine as vice chairman and an active board member.

Among the firm’s previous portfolio companies was Spectrio, whose EBIDTA Johnson said his firm grew 12-fold in just over seven years, before selling the business to The Riverside Company in late 2014. The company’s current portfolio companies in addition Native Maine are Osmotics Cosmeceuticals and Best Made Toys.

RLJ was brought in as a co-investor in order to “grow the company while having a fair amount of dry powder to finance future acquisitions,” Johnson said. The middle-market private equity firm, which was founded in 2006 by Robert Johnson (no relation to Scott) in partnership with The Carlyle Group, invests in buyouts, recapitalizations, and growth capital infusions.

Triangle Capital Corporation provided a senior term loan, revolving line of credit, and equity co-investment on the Native Maine deal.

Johnson was unable to comment on financial details.