Brazos Food Team Yields Crop Of Deals

Targets: Sadler’s Bar-B-Que Sales Ltd.; Golden County Foods Inc.

Prices: Undisclosed

Sponsor: Brazos Private Equity Partners

Sellers: Management

Financial Advisors: Sadler’s: Westlake Securities; Golden County: Houlihan Lokey Howard & Zukin

A year and a half ago, Brazos Private Equity Partners teamed up with food industry veteran Terry O’Brien to find some good LBO candidates. The partnership yielded fruit earlier this month, as the venture closed its first two deals.

Brazos Private Equity acquired Sadler’s Bar-B-Que Sales Ltd., a family-owned firm based in Henderson, Texas, that grew from a roadside food stand into a mult-istate meat smoker and distributor. The Dallas-based buyout firm also bought Golden County Foods Inc., a Plover, Wisc.-based maker and distributor of frozen foods, with a bent toward potato products. O’Brien will become CEO of both companies.

Jeff Fronterhouse, a Brazos Private Equity partner, wouldn’t disclose the deal’s terms. However, he said that the pair of deals absorbed most of the $60 million his firm pledged from its $400 million second fund to back the food industry venture with O’Brien. There’s enough left over for some add-on acquisitions, and Fronterhouse said Brazos Private Equity would exceed the $60 million threshold if the right follow-on deals present themselves. The partnership could also extend to future funds. “It’s intended to be a long-term relationship that will invest in more than one or two companies,” he said.

O’Brien has held executive-level positions at food and beverage concerns Dean Foods and Frito-Lay. Most recently, he founded Wholesome Holdings, a parent company on the prowl for subsidiaries. Brazos Private Equity, meanwhile, wanted to expand into the food and beverage market and sought out a partner capable of finding deals and running companies once they were in the portfolio, Fronterhouse said.

Under the terms of the partnership, Brazos Private Equity is contributing the vast majority of the equity, while O’Brien primarily delivers sector, sourcing and operating expertise.

Both of the newly acquired companies came to the team in spring 2007. A small investment bank based in Houston, Westlake Securities, was shopping Sadler’s, which was still run by the founding family that had transformed the company during 60 years of management. The company operates a 200,000 square-foot processing facility and moves its products through a growing national network of restaurants, groceries and branded-food processors.

Golden County, meanwhile, was built up over the last 16 years by its founder into a large maker and distributor of frozen appetizers and snacks. Houlihan Lokey Howard & Zukin ran an auction for Golden County.

The entrepreneurs at the helms of both companies have agreed to maintain active roles after the deals close. Both companies stand to benefit from what Fronterhouse described as an “infusion of marketing techniques.” Brazos Private Equity solicited detailed market studies before buying both companies, learning, among other things, that 75 percent of American households have barbeque sauce in their cupboards, suggesting that there’s room for the Sadler’s national distribution network to grow. To help with a more sophisticated marketing strategy, O’Brien intends to direct both companies to better tailor their product packaging and flavors to tastes in different regions of the country.

Brazos Private Equity secured debt agreements for both deals before the credit market seized up in July. GE Antares, Bank of America and Amegy Bank provided senior credit for Sadler’s, while Hartford Mezzanine Investors provided mezzanine financing. For Golden County, Merrill Lynch Capital provided senior financing, while Babson Capital served as the mezzanine lender.—J.H.