PEP sees sweet exit on Griffin's Foods

"This one had fit a real sweet spot for us," recalls David Brown, managing director at PEP. "We like carve-outs because they tend to be good brands with good market positions, but just need that extra level of love, a bit more focus and bit more attention."

PEP's carve-out investment thesis has three elements: introducing a quality management team; adding extra capacity through a capital investment program; and increasing exports. In the case of Griffin's, the first element was addressed by bringing in Ron Vela, who formally ran Australian food group Goodman Fielder, to run the business.

"We bought chicken producer Tegal Foods and Griffin's within six months of each other." says Brown. "Whilst they are different companies they are still consumer business based in Auckland so we got Ron to run both of them in the beginning."

Over the eight-year holding period PEP was able to achieve much of what it set out to do. Griffin's established an international export division, building on a strong presence in Australia and New Zealand to sell its products in more than 20 countries.

Exports previously accounted for 5% of revenues; now they are responsible for one third. Griffin's also expanded into a new product category by completing the NZ$55 million bolt-on acquisition of Nice & Natural Wrapped Snacks - which produces granola bars - in 2007 and boosted capacity by investing NZ$80 million in two new manufacturing centers.

The company reported EBITDA of NZ$78 million in 2013, up from around NZ$40 million when PEP bought it. Griffin's, which celebrates its 150th anniversary this year, is now looking expand further, particularly in Asia. Universal Robina (URC) - one of the largest branded consumer food and beverage companies in the Philippines with a market capitalization of $7.6 billion - was the perfect fit for these aspirations, says Brown. URC will pay NZ$700 million ($608 million) in cash for Griffin's and it is expected to use its distribution networks in the Philippines and across Southeast Asia to support entry into new markets.

"It was targeted trade sale, so were we were talking to a number of parties to see whether their strategy was consistent with Griffin's next phase of growth," Brown adds. "The new growth angle for the business in Asia is not to compete on a cost basis but through a high quality, trustworthy brand. URC's strategy is consistent with that.

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