A striking transaction has been announced in the private-equity world, with US buy-out house Catterton to join forces with the investment arm of luxury goods group LVMH.
Catterton, an investor in US food businesses Ferrara Candy Co. and gluten-free snacks maker Beanitos, is to combine with L Capital, the private-equity arm of a group that owns products from Moet Champagne and Hennessy Cognac to Christian Dior perfumes and Louis Vuitton handbags. It is the kind of deal not often seen in private-equity circles.
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The new firm will be called L Catterton. The two sides said the new group would be “the largest, global consumer-focused investment firm” and would look at assets in North America, Latin America, Europe and Asia. They expect L Catterton expects to grow its assets under management to more than $12bn after various successor funds are closed.
The partners behind L Catterton will have a 60% stake, with the rest jointly owned by LVMH and Groupe Arnault, the family holding company of Bernard Arnault, the chairman and CEO of the French group.
Catterton managing partners Michael Chu and Scott Dahnke will be the enlarged firm’s global co-CEOs.
“The globalisation of media and technology, combined with increasingly permeable geographic borders, is driving rapid consumer growth on an unprecedented global scale,” Dahnke said. “Together, Catterton and L Capital will create a global consumer investing franchise with unmatched access to resources in the industry. We expect this combination to further our mission of investing in high growth opportunities in categories with attractive consumer economics.”
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By GlobalDataMr Arnault said LVMH had been an investor in Catterton’s funds since 1998. He said the transaction would combine “our global network and industry expertise with Catterton’s long-standing operational approach to building value in consumer investments”.
The deal is expected to close in the early part of the year. As well as Ferrara and Beanitos, its assets will include frozen fruit and veg supplier Alasko and Canadian bottled water supplier Naya.
Broadly, private-equity firms interested in the food and beverage sectors have been facing increased competition from trade bidders, with M&A watchers noting an increasing willingness among packaged food groups to buy smaller companies, which traditionally would have been more likely to have seen private-equity investment, in their quest to inject growth into their businesses.
Catterton also already has interests in a range of foodservice outlets including fresh food operator Chopt, fast-casual chain Mendocino Farms and noodle chain Noodles & Co.
More private-equity firms are showing an increased appetite for foodservice. With the growth of the channel outpacing the retail sector, foodservice is being seen as a good place to put funds.
L Catterton, then, will face stiff competition for assets but its new strength will have rival buy-out houses and trade players taking notice.
Furthermore, the new entity could be handily placed to invest in consumer-facing businesses in emerging markets, especially with LVMH’s experience in countries like China.
Whatever, the first major M&A transaction of 2016 has, intriguingly, come between private-equity players and right along the consumer-facing parts of the food sector companies will be watching closely.
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just-food has this week published research into the factors that will drive M&A in the food industry from now and into 2018.
The full report will be available from just-food in mid-February. However, those who take out an annual subscription to just-food before 31 January 2016, at a 35% discount on standard pricing, will receive free copies of both ‘Drivers of Food Industry M&A’ and another recent report, ‘How Brands Can Win in Online Grocery’, which was written by Professor David Hughes, Emeritus Professor of Food Marketing at Imperial College London and Miguel Flavián. To take advantage of this offer click here.
