Affinity buys Australian meats producer

The private equity investor has been in talks with Primo since February, when the company's owners, the Lederer family, put a majority stake up for sale. The family had initially sought to exit via a public listing, with a valuation of A$700-800 million touted, but pulled the plug in response to market instability. Affinity was finally able to close the deal this month, supported by A$580 million in debt provided by 11 financiers. The Lederers will continue to hold a 30% stake in the company.

Primo claims to be the largest producer of ham, bacon and smallgoods in Australia, through contracts with Coles and Woolworths. The company reported EBITDA of A$1.4 million for the most recent fiscal year.

This has made it a valuable target at a time when interest in Australasian agricultural assets - cattle and poultry in particular - is at a high. The investment thesis is that emerging markets not only represent an export market for producers of livestock and other foods, but also a potential exit channel. A Chinese strategic buyer might come in for an asset as an alternative to a public listing.

"There is a ‘protein' theory - you buy low-cost, high-quality sources of food and build a platform that can be sold to developing nations that need food security. We receive quite a few unusual inquiries from offshore about gaining access to basic food-type businesses," Andrew Thompson, head of private equity at KPMG Australia, told AVCJ last month. "Their number one exit would be China, India or the Middle East. That's what they are writing on their investment proposals."

Primo isn't Affinity's first "protein play." In April, the private equity firm won approval to buy 100% of NZ Poultry Enterprises for NZ$600 million ($482.3 million). Pacific Equity Partners previously owned a 43% of NZ Poultry, which sought to sell subsidiary Tegel Foods a year ago. That process was said to attract strategic players from another emerging market, Brazil.

Affinity also faced stiff competition for Primo itself, with The Blackstone Group, Archer Capital, Pacific Equity Partners and CHAMP Private Equity said to be rivals at various points in the auction process.

Other PE owners of food assets in Australia include Archer Capital, which purchased Western Australia's leading dairy products firm Brownes Foods in March; Paine & Partners, which picked up 50% of fresh produce firm Costa Group; and Terra Firma, which two years ago bought Consolidated Pastoral Company, Australia's second-largest beef producer.

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• Topics
• Buyouts
• Australasia
• Industrials
• Consumer
• Affinity Equity Partners
• Pacific Equity Partners
• Australia
• New Zealand
• buyout
• Agriculture