Hosen closes $280m single asset continuation fund for Kilcoy

Pantheon and Committed Advisors led a USD 200m commitment from incoming investors, while Hosen contributed USD 80m from its third fund, according to sources close to the situation. There was sufficient demand from external investors, but Hosen concluded that putting in more of its own capital represented a better alignment of interests, one source added.

Hosen and UBS, which advised on the deal, both declined to comment.

The secondary involves a position in Kilcoy held by the private equity firm’s debut US dollar-denominated fund, which closed on USD 128m in 2012. Proceeds from the transaction will bring distributions to paid-in (DPI) on that fund to just over 3x. Three assets remain, of which two have been partially exited.

None of the existing LPs in that fund rolled over their interests, the sources said. However, several investors – including China agribusiness giant New Hope Group – maintain exposure to Kilcoy through co-investments. Hosen relied on contributions from each of its first two US dollar funds, plus co-investors, as it grew the company from USD 330m to USD 2bn in annual revenue.

There have been five bolt-on acquisitions along the way. The most recent additions were designed to bring greater supply chain diversity. Kilcoy was being primed for a Hong Kong IPO two years ago until China imposed restrictions on beef imports from Australia, the company’s major sourcing location.

These restrictions came in the form of temporary restrictions targeting specific plants rather than brands or companies nationwide. Kilcoy’s solution is like that employed by global players like Cargill and JBS Foods: have multiple plants, so that if one is subject to regulatory action, the others still function as part of a multi-source supply chain.

When Hosen bought Australia-headquartered Kilcoy, which had spent 54 years under family ownership and then six years as a portfolio company of two successive private equity firms, Australian exports to China were just taking off. Weihai Weidao Foods, a supplier to major Western restaurant chains in China, was soon added to close the supply chain loop.

“Following the acquisition, we sat down with the Hosen team and devised a three-year strategic plan. We are now on our third plan and our core values and direction haven’t changed materially, although we have incorporated new and emerging strategies that complement our core business,” Dean Goode, Kilcoy’s CEO, who has been with the business since 2007, told AVCJ last year.

Processing plants were upgraded, enabling the company to process more head of cattle and handle higher-end meat, while further M&A facilitated expansion into areas such as foodservice and retail distribution and institutional catering. There was also a substantial swing from the US to Asia, with China, Japan, and South Korea absorbing 70% of Kilcoy’s output.

Environment, social, and governance (ESG) became a priority as well. Kilcoy is now carbon neutral in Australia, recycling nearly 100% of its biowaste for electricity generation, recycling water, and producing its own hot water.

Australia saw one of the first significant single asset continuation deals in Asia when Baring Private Equity Asia used the structure to extend its holding period for EduCo Global in 2019. In the past 18 months, interest in single asset deals has grown exponentially across the region. Most recently, Pacific Equity Partners was considering it for smart meter business Intellihub.

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• Topics
• Australasia
• Greater China
• Consumer
• Industrials
• Secondaries
• Australia
• China
• Secondaries
• Pantheon
• Committed Advisors
• Hosen Capital