Exit and acquisition for HgCap

HgCapital, the UK-based mid-market buyout firm, has paid more than €100m for Hofmann-Menue Group, a German frozen food caterer, in its first move into the sector.

The tertiary buyout offers an exit for Pricoa Capital Group, a Chicago-based private placement debt provider owned by US-based Prudential Financial. Pricoa took full control of Hofmann in 1999 when it bought a stake held by UK-based fund manager Schroders, to which Pricoa had already supplied mezzanine capital in 1996.

Pricoa decided in 2003 to concentrate on providing debt financing rather than taking equity positions and has been selling its existing holdings even when it has involved taking a loss. That was the case with Waterford Stanley, an Irish iron cooker manufacturer, which was sold to UK rival Aga Foodservice for €13.8m this summer.

Headquartered in Boxberg-Schweigern, Germany, Hofmann provides frozen food products as well as related on-site catering for small business canteens, which all German firms have to offer, and social organisations, such as care homes, hospitals and schools.

Hofmann’s 2005 turnover is expected to be more than €90m, HgCapital said. “Hofmann is the market leader in Germany in the production and delivery of frozen food and a strong number two in the ‘meals-on-wheels’ business,” said Karsten Hartmann, director of HgCapital’s Frankfurt office.

HgCapital was advised by Sal Oppenheim, with legal counsel from Lovells and KPMG providing due diligence. Debt financing was provided by HVB.

HgCapital Trust, a listed, closed-ended fund managed by the firm, contributed €6.9m in equity as part of the deal.

HgCapital opened its German office in 2003 and has completed six acquisitions in the country, which has often proved reluctant to accept private equity financing for mid-sized companies.

HgCapital, until recently an investor in Irish bookmaker Paddy Power, has also agreed to buy UK-based spread betting company Sporting Index Group for £75.8m (US$133m) from Duke Street Capital.

Ben Hewetson, head of leisure investments at HgCapital, said that Sporting Index represented a robust base from which to build a larger group, both organically and by acquisition.

Royal Bank of Scotland provided debt financing for the acquisition. HgCapital was advised by Global Leisure Partners, Lovells, PricewaterhouseCoopers and Concise Consultants. Duke Street Capital was advised by Rothschild and Edwin Coe. Sporting Index management was advised by M&C Ventures.