Goldman Sachs, Vestar to acquire Hearthside Food
March 19, 2014
by Eric Schroeder
NEW YORK — Goldman Sachs, a global investment banking, securities and investment management firm, and Vestar Capital Partners, a private equity firm, have signed a definitive agreement to acquire Hearthside Food Solutions from Wind Point Partners, a Chicago-based private equity firm. Financial terms were not disclosed.
Based in Downers Grove, Ill., Hearthside Food Solutions is the nation’s largest and fastest-growing independent bakery and a full-service contract manufacturer of grain-based food and snack products for many of the world’s leading brands. Hearthside offers a diverse product portfolio focused on four main platform categories: bars, cookies/crackers, granola/cereals, and snacks. The company manufactures more than 150 brands and 1,400 stock-keeping units for its top customers. Hearthside operates 20 food-manufacturing facilities in eight states.
“When we launched Hearthside in 2009, we envisioned a company that could transform the contract manufacturing industry,” said Rich Scalise, chairman and chief executive officer of Hearthside. “We have achieved that goal, building an industry leader and a highly successful business in the last five years based on the principles of being fast, flexible and adding more value. Going forward, by leveraging the experience and relationships of both Goldman and Vestar, we are confident we can take the company to the next level of growth in the contract manufacturing industry. We look forward to working with our new partners.”
Nicole Agnew, a managing director in the merchant banking division at Goldman Sachs, commended Hearthside for its ability to accelerate its growth trajectory.
“We are extremely pleased to have the opportunity to invest in Hearthside and partner with its first class management team and employees,” Ms. Agnew said.
Dan O’Connell, c.e.o. of Vestar, called Hearthside a leader in “quality, safety, and innovation.”
“They respond rapidly to industry trends and shifting consumer preferences,” Mr. O’Connell said. “Now more than ever, food companies turn to co-manufacturers like Hearthside to help them initiate and accelerate the commercialization process and for timely response to changing consumer preferences. We are excited to work with Rich and his talented team to take advantage of these positive long-term trends and grow the business.”
Affiliates of Barclays Capital and Goldman Sachs provided commitments for the debt financing for the transaction. Davis Polk & Wardwell L.L.P. acted as the legal advisor to Goldman Sachs and Vestar in the transaction, which is expected to close in the second quarter of 2014.
Announcement of the transaction comes a little less than a year after Wind Point Partners merged Hearthside Food Solutions with another of its portfolio companies: Ryt-way Industries. That move created a contract food manufacturer with more than $1 billion in sales and 19 manufacturing facilities across 7 states. Wind Point acquired Hearthside Food Solutions in April 2009 and Ryt-way in August 2008.
In conjunction with the merger, Wind Point Partners agreed to sell some of Hearthside’s assets, including the branded and private label cereal, granola and snacks business, to Post Holdings, Inc. for $158 million.
Founded in 1869, Goldman Sachs provides a range of financial services to a diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals.
Vestar Capital Partners is a U.S. middle-market private equity firm specializing in management buyouts and growth capital investments. Vestar invests and collaborates with incumbent management teams and private owners to build enterprise value. The firm has experience in the food industry, with past investments in Celestial Seasonings, Michael Foods and Birds Eye. Currently, Vestar’s portfolio includes Del Monte — now Big Heart Pet Brands, the largest pet snack company in U.S. — and specialty foods leader Roland Foods.
Vestar is targeting equity investments in the range of $50 million to $150 million in U.S.-based middle-market companies with enterprise values ranging from $250 million to $1 billion. Founded in 1988, Vestar funds have completed more than 70 investments in companies with a total value of more than $40 billion.