Hicks Muse Puts Some Fiber In Its Portfolio –

Hicks, Muse, Tate & Furst continued its push onto grocery store shelves in Europe, this time finding its way into the cereal aisle with the GBP642 million ($1.1 billion) purchase of Weetabix. The deal reflects Hicks Muse’s drive to accumulate a coterie of brand-name food products, and closely follows its purchase of Unilever’s Ambrosia desserts brand and its Brown & Polson corn-flour unit.

However, while the Unilever purchases were made through Hicks Muse’s Premier Foods platform, the Weetabix buy, according to Hicks Muse Partner Lyndon Lea, will stand on its own. The business will be acquired through the recently formed Latimer Acquisitions Limited holding company.

Weetabix, primarily controlled by Sir Richard George, is a public stock and trades on the OFEX, a Britain-based electronic exchange. Based on the terms of the deal, holders of Weetabix Class A shares will receive GBP53.75 per share, while holders of Weetabix ordinary shares will receive GBP268.75 in cash for each share.

“We had a dinner with Sir Richard George and discovered that we shared a common vision,” Lea said. “In order to drive your major brands, you have to focus on fewer brands, and you need the resources of a larger group so you can support those brands properly.”

Weetabix, while generally overshadowed in the U.S. by Kellogg, Post and General Mills offerings, is the main player in Britain, holding a 14.2% market share, according to reports. The brands under the Weetabix umbrella-including Weetabix itself, Alpen, Ready Brek and Weetos-differ from many of their American counterparts in that as a whole, the brands promote themselves as healthy choices based on their high fiber and low sugar content.

It was a combination of Weetabix’s name recognition and its focus on health that drew Hicks Muse’s interest. “It follows the trend as far as healthy eating,” Lea said. “Its brands have the power to pull the consumer.”

Weetabix has been a strong performer in the past, generating GBP361.6 million in 2002 revenue with pre-tax profits of GBP44.4 million. Lea added that the company’s EBITDA margins are north of 17 percent. He further described that for Hicks Muse, this deal “is not a high growth play,” but to find whatever growth is out there, the firm will focus on driving product generation and building and developing its brands.

It’s no secret that Hicks Muse has been interested in raiding the European closet for food deals. Through its Premier platform, the firm has already lined up a healthy batch of British food names, including Branston pickle, Gales honey, Hartleys jam, Typhoo tea, Cadbury drinking chocolate, Loyd Grossman sauces and HP Foods. The firm originally gained control of Premier through its 1999 buyout of Hillsdown Holdings, which eventually was split into Premier and Burton’s Foods.

The firm is equally active in the U.S. food markets, and recently Hicks Muse worked out a $485 million exit from its Pinnacle Foods investment, selling the business to JPMorgan Partners in a deal that should yield a nourishing return of more than two times its invested equity.

For Weetabix, Hicks Muse will use capital from its $1.5 billion Hicks Muse Europe Fund I, and intends to finance the deal with a mix of equity and debt. Lea said the financing will incorporate “a traditional chunk of senior debt and a bridge to either a mezzanine or high yield piece,” and he said J.P. Morgan would lead the debt syndicate.


Purchase Price: $1.1B

Advisors: HMTF: J.P. Morgan Chase & Co., Weetabix: Rothchild

HMFT Lawyer: Weil, Gotshal & Manges LLC

Accountant: Pricewaterhouse-