Centre Practices Catch And Release –

Tuna has always been revered as an easy lunch. It’s just that few knew the albacore would make for an easy investment as well.

Centre Partners now knows this, having unloaded its remaining stake in the Connors Brothers Income Fund. The sale for Centre closes the door on its investment in Bumble Bee Tuna. The firm acquired the company from ConAgra Foods in 2003, investing $26.5 million in a more than $200 million deal. The next year, Centre turned around and realized a partial exit through merging the business with the publicly held Connors, giving the buyout shop a roughly 20% stake in the combined business.

After initially acquiring Bumble Bee, Centre wasted no time in shaking things up. While putting the infrastructure in place to exist as a stand-alone business, Bumble Bee also moved to reduce fix costs. The company sold a production facility in Ecuador, unloaded a non-core Australian business, and enacted a sale/leaseback of a California production facility. On top of that, Bumble Bee continued to roll out new products, including Bumble Bee prime fillet (a deluxe canned tuna) and Touch of Lemon (canned tuna with lemon seasoning). The company also unveiled tuna steak entrees last year.

Perhaps most notable, though, almost immediately following the transaction, Centre began negotiations with canned sardine producer Connors Brothers Income Fund about a possible link-up. Scott Perekslis, a managing director at Centre Partners, noted, “It wasn’t exactly a case of the minnow swallowing the whale, but Connors was a smaller company than Bumble Bee.”

The deal, valued at $385 million, made sense on a few different levels, in addition to the liquidity it provided Centre. For one, a Connors/Bumble Bee union would expand the product line of both companies and create a larger and more diversified revenue base for the combined business. In turn, the Connors dividend ultimately climbed from $1.20 per income trust unit to $1.40 following the transaction. The company also completed two additional acquisitions following the merger, including a $93 million deal for Castleberry/Snow’s Brands and the $45 million purchase of Sara Lee’s shelf-stable meats business.

Centre received $84 million from the sale, which left the firm with a 20% stake in the combined company. Centre sold off half of that in September of last year, resulting in a $57 million payment, and earlier this month the firm unloaded the remainder of its stake, taking in $72 million as part of the exchange. Centre also took in smaller distributions, and ultimately received $225 million in total proceeds from the investment. The firm’s return on equity stands at 8.5x, and the investment generated an IRR of roughly 545% on an annualized basis.

Centre used its $281 million, 1999-vintage Centre Capital Investors III LP fund for the investment. The same year Centre made the Bumble Bee investment, in 2003, the firm raised its fourth fund, Centre Capital Investors IV, LP, a $750 million vehicle.