PEP no chicken with Tegel Foods exit

PEP and Tegel have appointed Greenhill Caliburn and Morgan Stanley to look for best offers. Though Tegel and PEP declined any comment, Tegel said in its application filed with the Overseas Investment Office that a sale would "free up capital to invest and fund other capital investment projects."

Tegel has more than 50% market share in New Zealand and 1,550 workers, and is the biggest supplier to restaurants and hotels in the country. PEP was understood to have sold a 30-35% stake in Tegel to ANZ Bank's private equity unit in 2007. Since the involvement of PEP, whose partners, including Rickard Gardell, Antony Kerwick and Simon Pilar, have sat on the Tegel board, the company's revenue has increased by roughly one third to NZ$411.7 million ($290 million), of which net profit was NZ$29.5 million ($20.7 million) in the fiscal year 2009.

However market-watchers have also noted that the company is holding interest-bearing liabilities, with accounts to April last year showed that it was holding NZ$321.6 million ($226.4 million) in such liabilities and made interest payments totaling NZ$45.3 million ($31.8 million) during the previous year.

Earlier the company said that it sought to raise capital through an initial public offering, and that Tegel was preparing to sell NZ$133 million ($93.6 million) of flagship property assets. However, market conditions have now made a successful IPO an unlikely event, according to analysts, who instead suggest that trade buyers may emerge as the best option to facilitate an exit for PEP. This makes Tegel the latest instance of the twin-track exit approach already taken by other private equity firms in Australia, as AVCJ sources pointed out.

As the biggest supplier in this industry in New Zealand after Australian firm Inghams, Tegel earlier attempted to enlarge its operations via taking over the chicken business unit of Brinks; however, its application was rejected by Commerce Commission, which remarked at the time that it considered that the proposed acquisition would remove Brinks, a competitor that industry participants described as a price-discounting catalyst, from the market.

AVCJ asked legal sources about any possible regulatory difficulties this time around about possible exit options. One observed, "Any transaction should not cause a problem with the regulators involved with overseas investment, nor, except perhaps with one or maybe two trade buyers, with competition regulators."

 

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• Topics
• Exits
• Australasia
• Pacific Equity Partners