Trade sales bring food sector exits for 3i

3i has sold two food producing companies, St Merryn and G Costa, to trade buyers Grampian Country Food Group and Associated British Foods. 3i tipped the food and drink industry as a hot sector for investment in a report published at the end of last year. It cites continuing innovation, consolidation, continental European potential and the evolution of the food economy as drivers for investment in the sector. The size of both deals is undisclosed but 3i reports an IRR of 32% on its £12m investment in St Merryn.

St Merryn, now the UK’s second biggest red meat processor, was first funded by 3i in November 1987 when the Cornish company was in start-up phase. In the ten years following the initial investment the company received some £12m from the investor to build the company and support its growth. Specifically, funds were used to develop a state of the art facility at Merthyr Tydfil, South Wales, in the late 1990s. Prior to the sale the company’s other main shareholder was founder Terry Johnson.

St Merryn, which supplies Tesco, produces a wide range of beef and lamb products including burgers, barbecue products and ground beef. It generated pre-tax profits of £12m on a turnover of £296m in the year ended March 2002. Grampian is the UK’s leading privately owned agri-food business, producing fresh and frozen meat products for the retail, wholesale and foodservice sectors. This acquisition accelerates the group’s convenience foods offering. Grant Mackie, managing director of Grampian’s Beef Business Unit, said: “St Merryn is a very successful business, with well invested assets, a skilled workforce, a good farming supply base and blue chip customers.”

In a separate deal the investor sold G Costa, the producer and importer of oriental and speciality food brands, to Associated British Foods. The company’s largest brand is Blue Dragon, which produces sauces, and ingredients used in Chinese, Thai, Japanese, Vietnamese and Malaysian cuisine. Costa also manages a portfolio of brands for other food manufacturers including Tabasco, Maille and French’s. Annual sales in 2002 were £51.8m. The company will be run as a separate unit alongside ABF’s Westmill Foods, which supplies rice and noodles to the UK market.