Willis Stein & Partners, a private equity firm based in the Windy City, this month agreed to acquire Roundy’s Inc., a food wholesale and retail company, for an undisclosed value, though reports have indicated the purchase price is between $615 million and $730 million. The deal, which is expected to be completed in late May or early June, is Willis Stein’s foray into the retail food industry.
Financing for the transaction will be comprised of senior debt and a high yield offering provided by Bear Stearns & Co. and CIBC World Markets Corp., industry sources said. Willis Stein & Partners III LP, a $1.8 billion fund that was approximately 25% invested prior to this deal, will provide the equity.
Whyte Hirschboeck Dudek S.C., of Milwaukee, represents Roundy’s. Kirkland & Ellis represents Willis Stein.
Roundy’s, based in Pewaukee, Wis., supplies more than 800 supermarkets in 14 states and is a leading retail supermarket in Wisconsin, where it operates under the names Pick’n Save Stores and Copps Food Centers.
The path to Roundy’s began the same as many in the Willis Stein portfolio an idea first, then research, then the hunt for star executives and companies. In this case, the final result was an introduction to Robert Mariano, who will become the chief executive at Roundy’s, and the deal agreement. “We looked at various things over a long period of time, and then the Roundy’s deal came up, and it fit everything we were looking to do with Bob,” said Avy Stein, managing partner at Willis Stein. The main elements of that fit, said Stein, are a consistent and significant platform with great growth opportunities; great cash flow characteristics; long-term, deep customer relationships; and a talented management team that didn’t require many changes. Additionally, the firm was attracted to its Midwest location.
Upon completion of the deal, Willis Stein will be the controlling shareholder of Roundy’s and may eventually bring in some of its limited partners who co-invest in deals to participate, Stein said. The plans to grow the company will be focused on adding new stores to the retail side through organic development and through acquisitions, which may include some of the prior Roundy’s co-op licensees. The retail side will also look to add new product lines. Plans for the wholesale side of the business include expanding through channels to develop more products for existing customers and attracting new customers.
Mariano is experienced in the grocery store and food industry having served as CEO at Dominick’s Supermarkets Inc., of Chicago, through its initial public offering and later its leveraged buyout by Yucaipa. “The most accurate thing I can say about [Bob] is he is just a phenomenal executive in this area,” said Stein.
Stein said while he and management are mainly focused on growing the company at this point, an exit through IPO could be attractive for Roundy’s in time. “It’s a platform we want to build on, and we think it will be a great independent company as an IPO,” said Stein. “Obviously, we’re going to be gearing it in that direction initially.”
However, the hunt is not over for Willis Stein. The firm still has another industry executive, Richard Buell, waiting in the wings for a good target company, this time in a food manufacturing business. Buell is a former executive at IBP Products and Kraft.