Circle Peak Acquires Hill & Valley –

In light of the Atkins Nutritionals Inc. collapse, one might think that buyout shops would be hesitant to invest in a diet food product. But neither the carb catastrophe nor the recent increase in Splenda sweetened products kept Circle Peak Capital Partners from acquiring Hill & Valley Inc., a longtime producer and distributor of sugar-free and no-sugar-added baked goods.

No financial terms were revealed, but Fifth Third Bank of Chicago provided senior debt and Prism Mezzanine, a division of Chicago’s Prism Capital Corp., provided mezzanine financing.

Hill & Valley’s products are stocked in the in-store bakery sections of 20% to 30% of grocery stores nationwide. According to R. Adam Smith, Circle Peak’s founder and managing partner, the company’s established product and customer base particularly appealed to the PE firm.

“They’ve been in business for almost 20 years and it’s one of the oldest producers of these low sugar products-primarily for diabetics-but as consumers have looked for lower sugar alternatives, particularly in the dessert category, the core customers have evolved beyond diabetics to include non-diabetic healthy customers, and that core product capability is very exciting for us,” Smith said.

In addition to reaching out to a wider array of customers, Circle Peak plans to grow the company by penetrating the natural and specialty store market, targeting restaurants and other food service categories and pursuing smaller add-on acquisitions to complement and expand the product line.

Circle Peak will continue to support Hill & Valley’s current president, Scott Florence, but the firm does plan to add a member of its own team to the company’s management. Brian Gustaitis, a senior executive at Circle Peak, will join the Hill & Valley board.

Gustaitis has over 25 years of consumer goods experience and food expertise, as he previously served in senior management positions at Tetley USA Inc. and Pepperidge Farm Inc. Most recently, Gustaitis served as President and COO of Kozy Shack Enterprises, a manufacturer and marketer of refrigerated pudding, where he engineered a successful financial turnaround.

“Brian’s involvement will bring over twenty years of consumer goods and food expertise to the company’s benefit,” Smith said.

Hill & Valley was advised by RSM EquiCo, a division of H&R Block, who initiated the sale to Circle Peak. “There was an initial phase of discussions with a broad range of parties and we quickly settled to exclusivity in the first quarter,” Smith said.

Circle Peak was represented by Akin Gump Strauss Hauer & Feld LLP and used in house operating advisors Robert W. Kraft and Doris Zelinsky. The purchase was made using the Circle Peak’s latest unspecified fund.