Linsalata, In First Food Deal, Buys Mint Maker

Target: Hospitality Mints Inc.

Price: Undisclosed

Sponsor: Linsalata Capital Partners

Seller: American Capital Ltd.

Financial Adviser: Seller: Houlihan Lokey

It took nearly three years but Linsalata Capital Partners has landed its first food industry deal.

The Cleveland-based buyout shop has acquired Hospitality Mints Inc., a Boone, N.C.-baker of promotional mints and other personalized candy products, from American Capital Ltd. Financial terms of the deal weren’t disclosed but Linsalata Capital typically writes equity checks of between $10 million and $85 million. It targets companies generating EBITDA of between $7 million and $40 million in manufacturing, consumer products, building products.

Linsalata Capital declined seller financing from American Capital, opting instead for financing provided by a group of banks it had worked with in the past. The firm, citing the comfort of its prior dealings, went with Chicago’s Madison Capital, National City of Cleveland, and Babson Capital, based in Charlotte, N.C. The firm funded the deal with 40 percent equity, which is in line with the M&A market since the burst of the buyout bubble.

Eric Bacon

, senior managing director, told Buyouts, that the firm has been looking to buy something in the food industry in part because the market offers strong resistance to recessions, and in part because it is less vulnerable than other sectors to foreign competition. “It’s not something people stop buying when times get tough,” Bacon said. “Banks like to finance it, we like to invest in it.”

To be sure, wrapped mints, typically available after a meal at a restaurant, aren’t exactly staples for consumers during a recession. And it’s well known that many restaurant chains are getting hammered by the slowing economy. But part of Linsalata Capital’s bet is that the restaurant industry will rebound, Bacon said.

Jay Novak, managing director, and Jeff Stern, director, at Houlihan Lokey in Chicago, brokered the deal for American Capital.

Linsalata Capital has been looking to make an investment in the food industry for about three years, Bacon said. Last year, the firm put together marketing materials expressing its interest in food and beverage deals and sent them to about 2,500 investment banks and other intermediaries. “They would not have thought of us for food deals and we wanted to make sure they did,” he said.

The firm is hoping that it won’t be another three years between deals in the food and beverage sector. Specifically, it’s looking for pitches from bankers that include private label (cheaper, store-brand products) food products, niche branded food, and companies that provide food-related services to schools and hospitals.