TPG plucks chicken deal

By December, however, Blackstone, realizing it was one of the only bidders left, decided to lower its offer price, prompting Inghams to suspend the bidding process over the New Year.

In January, the company Inghams went back to TPG asking to discuss the original bid, and the PE firm entered a six-week due diligence process. Both TPG and Blackstone were among those to submit final offers in March, with the former bidding A$850 million in cash plus a A$30 million vendor note payable in six years time. It is not known what Blackstone offered but on this occasion, TPG pipped them at the post.

"People thought Blackstone was way ahead, so there was surprise when TPG finally clinched the deal; no one had taken them seriously," says one individual with knowledge of the transaction.

The minimum equity requirement was 30%, with A$625 million in financing coming from a syndicate of local and international banks, including WestPac, Australia and New Zealand Banking Corporation (ANZ), National Australia Bank, Macquarie, HSBC, Nomura and Bank of America.

Unlike TPG, Blackstone had planned to source financing from the US, taking advantage of the recent explosion in cheap acquisition debt that has fueled some large North American and European deals. TPG stuck closer to home, keen to avoid the hedging costs at a time when the US dollar-Australian dollar exchange rate is volatile.

At around 4.8x EBITDA, the valuation was more than favorable, especially compared to other recent acquisitions in this space. The most the notable of these is Affinity Equity Partners' purchase of Tegel Foods, New Zealand's number leading poultry firm, for NZ$605 million ($499 million), at around 7.8x EBITDA, in 2010.

Inghams is second only to Tegel in New Zealand and remains the dominant Australian player with a 38% market share. Annual revenues exceed A$2 billion from operations covering chicken and turkey production, piggeries, animal feed and pet food ingredients. It is looking to move into value-added chicken products such as fillets and drumsticks. EBITDA for the current fiscal year is expected to reach A$200 million.

For TPG, it is another private equity "protein play." For example, after completing the acquisition of Tegel, Affinity bought Australia's leading deli meats producer, Primo Smallgoods, in late 2011 and is now pushing both companies into the wider Asian market.

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• Topics
• Australasia
• Consumer
• Buyouts
• Buyout
• New Zealand
• Australia
• Consumer
• TPG Capital
• The Blackstone Group
• buyout