Chicago-based private equity firm Lake Pacific Partners, which set out to invest in the food and consumer products markets last year, agreed last month to buy its first majority stake. If the deal is completed, Lake Pacific and management will acquire 100% of the cellulose and fibrous food casing business of Devro-Teepak Inc., a subsidiary of U.K.-based Devro PLC. The deal, which is currently pending shareholder approval in the U.K., is expected to close at the end of the month.
Lake Pacific will purchase the company, which will be renamed Teepak LLC, for $7.15 million in cash and the assumption of approximately $40 million in liabilities, consisting of some employee benefits-related liabilities. The equity will be provided by Lake Pacific’s debut $101 million fund and with equity from the senior management team led by Paul Murphy, the president of the company.
Considering that the food industry has felt the effects of the current market, Lake Pacific decided not to leverage the transaction with debt. “It is an industry in a downturn recently,” said Terry Sebastian, a managing director at the firm. “We felt that a conservative capital structure made the most sense for an investment in this industry at this time.”
The worldwide market for cellulose and fibrous casing is estimated to be approximately $700 million. The Teepak business, which manufactures cellulose and fibrous casing used in the processed meat industry on foods such as sausages, frankfurters and deli meats, brought in revenue in excess of $160 million last year.
“Our plans are to work with management to continue to make improvements in the business and to focus on the cellulose sector of the business,” said Sebastian. “And [we plan to] thrive through what’s been a difficult cycle, but come out on the other end as one of the strongest remaining competitors.”
Sebastian said Lake Pacific would certainly look for add-on opportunities for Teepak, whose headquarters will be in Lisle, Ill. Teepak’s major manufacturing facilities are in Danville, Ill.; Summerville, S.C.; Kansas City, Mo.; Belgium, Netherlands, and Czech Republic. Its products are marketed through sales staffs in Chicago, Miami, Toronto, Zurich, Moscow and Lommel, Belgium.
Lake Pacific Partners, directed by former food executives Sebastian and William Voss, completed its first deal earlier this year with a minority stake investment in Trade Wind EC, a Dallas-based company that provides electronic transactions services to companies in the grocery retail and wholesale industry.