New York-based buyout firm Fenway Partners has made its first significant exit with the sale of San Diego-based Mexican frozen food maker Delimex Holdings to consumer products giant H.J. Heinz Co.
Fenway acquired Delimex in April 1997. Its original investment was roughly $100 million. Fenway and Heinz declined to disclose the precise size of the deal between them, but conceded it was between $200 million and $250 million.
Richard Dresdale, president of Fenway, explained the timing of the Delimex exit by saying his firm wanted “to take advantage of the company’s growth while it is still growing. We knew a strategic buyer would take the company to the next level,” he added, “and would broaden the company’s distribution.”
For Pittsburgh-based Heinz, the acquisition of Delimex gives the company’s frozen food division a solid base for building a branded Mexican food presence for the first time, according to Heinz, in what it calls the “heat-and-eat” or “grab-and-go” segment. (In 1999, Mexican food supplanted hamburgers as the third most popular hand-held food for lunch at school, according to the American School Food Service Association.)
During Fenway’s ownership of Delimex, the firm, with help from Dresdale, managed to recruit a professional management team for the company, which had previously been a family-owned business, while at the same time maintaining the company’s entrepreneurial feel. Heinz plans to keep the management team in place at Delimex – at least through next April, the end of its fiscal year.
The team Fenway recruited includes Eric Brenk from Quaker Oats, William Parker from Campbell Soup and Dori Reap from Frito-Lay. (Only Kathleen MacDonnell, president and CEO, will leave to pursue other opportunities. She was originally recruited from Campbell Soup.)
Delimex, founded in 1984, produces and distributes frozen Mexican food products that are sold in warehouse clubs nationwide, including Costco and Sam’s Clubs, and in supermarkets mainly in the West and Southwest.
Mark Genender, a managing director at Fenway with food experience from Nabisco Holdings and PepsiCo Inc., said gaining distribution in national supermarkets was critical for Delimex to be attractive to a large strategic buyer such as Heinz. Fenway therefore committed itself to developing the company’s brand and retail expansion while investing in new products and company operations.
In fact, Fenway’s number one goal was to gain distribution in supermarkets and, today, the company’s products are in 10,000 outlets.
Genender said the company has experienced 40% growth margins over three years. Today Delimex has sales of approximately $150 million.