Food Companies Satiating Private Equity's Hunger for Deals

NEW YORK ( TheDeal) -- Private equity firms are satiating their hunger for deals with investments in and out of high-growth food companies.

PE firm VMG Partners, based in Los Angeles, has been one of the more active players in the space. It is closing in on investments in two energy bar companies, San Diego-based  Perfect Bar & Co. and Richmond-based Health Warrior, according to sources.

The two businesses generate around $15 million in revenue. VMG did not respond to a request for comment. Perfect Bar and Health Warrior also did not immediately respond to a request for comment.

VMG is in the process of selling portfolio company Vega, a maker of plant-based protein. A source familiar with the talks said the process is fairly far along at this stage with an announcement likely within the next few weeks. It is likely to achieve a valuation north of $300 million.

VMG also invested in El Segundo, Calif.-based Quest Nutrition, acquiring a minority stake in a deal that valued the company at around $900 million based on revenue of roughly $300 million, according to a source familiar with the situation.

Meanwhile, Live Better Brands, the Minneapolis-based maker of the Way Better Snacks brand, was close to selling a stake to New York-based PE firm Alliance Consumer Growth, according to sources.

The snack food company, which has more than $15 million in revenue, has been looking to raise additional capital earlier this year, according to its CEO and founder James Breen.

Neither Alliance Consumer Growth nor Live Better Brands immediately responded to a request for comment.

  Boulder, Colo.-based Thanasi Foods, parent of Duke's Jerky, founded by Justin "Duke" Havlick, has recently sold a stake to Encore Consumer Capital, according to the San Francisco-based PE firm's Web site.

Thanasi Foods, also a maker of sunflower seed snacks, has well above $10 million in annual revenue at this stage. As of 2007, Thanasi had revenue of $7.6 million, according to business journal BizWest, and has been growing rapidly ever since, according to sources.

The Deal had previously reported that Thanasi had likely attracted PE investment.

 
SkinnyPop Popcorn, which had sales of nearly $90 million for the 12 months ended Aug. 10 according to industry publication Food Business News magazine, is working with Goldman Sachs and Jefferies on a dual-track process, said sources familiar with the situation.

A source said that SkinnyPop, backed by PE firm TA Associates, is as serious about an initial public offering as a sale, despite a sale being more logical. The company hired Tom Ennis, the former chief executive of Oberto Brands, as chief executive to build out the management team so that an IPO could be an option, said a source.

 
The source said that strategic buyers are planning on making bids for the company. But in light of the fact that the same bidders had an opportunity a year ago to buy SkinnyPop, how committed such potential buyers are to paying up for the high-growth snack food business is open to question.

A challenge for the company is that it does not have a diversified product line-up. And while it would initially be awarded a healthy valuation, the stock would likely take a hit once the lock-up period expires, said a source.

Neither SkinnyPop nor TA Associates immediately responded to requests for comment.

Meanwhile, Applegate Farms, backed by PE firm Swander Pace Capital, was closing in on a deal with Hormel Foods  (HRL). But a source familiar with the situation said that Hormel discovered issues with the target during the due diligence process, which has delayed a transaction and left industry observers wondering whether a deal will get done.

The source said it does not mean, however, that a deal will not happen, though an announcement was expected by now. Swander Pace declined to comment, while Applegate did not immediately respond to a request for comment.

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