Sun Capital Partners takes the cheese

It might be summer, but Sun Capital Partners isn’t ready to take a vacation. The private equity firm on July 11 acquired food gifts cataloger Hickory Farms. Terms of the deal were not disclosed.

Founded in 1950 as a cheese merchant, Hickory Farms sells sausages, crackers, desserts, and jams through seasonal kiosks, a catalog, and Website.

The company also distributes its product line through grocery stores and big-box retailers such as Target and Wal-Mart. Hickory Farms — whose annual sales are estimated at $180 million — employs 200 people nationwide.

Another private equity firm, Jupiter Partners, had owned Hickory Farms since 1998.

Sun Capital Partners will own 100% of Hickory Farms. The investment firm owns 155 other companies with a total of $35 billion in annual sales. In the week before its acquisition of Hickory Farms, Sun Capital bought a 75% stake in the Limited Stores women’s apparel unit of Columbus, OH-based Limited Brands.

Sun Capital also acquired gifts cataloger Lillian Vernon in May 2006, and it bought multichannel sporting goods merchant Edwin Watts Golf Shops this past May.

But what does Sun Capital want with a cheese cataloger? To Chris Shannon, managing director for investment bank Berkery, Noyes & Co, the deal makes perfect sense. “Sun Capital has a wide variety of companies in their portfolio,” Shannon says. “Although on first review many of the companies seem not to cross over, but when you look deeper they often do relate.”

In this case, Shannon says, Sun Capital owns interests in other companies that can directly help in bringing Hickory Farms “to another level. These companies are Village Pantry and Marsh Supermarkets on the food retail side and Bruegger’s, Super Salad, and Garden Fresh on the restaurant/deli side of the market.”

Stuart Rose, managing director for Wellesley, MA-based investment bank Tully & Holland, says the deal is another example of an ongoing industry trend. “Once again we have a [multichannel] company being acquired by a private equity group,” he says. “As long as debt remains cheap, this trend will continue.”

As for the transaction itself, Rose says: “When you look at Sun Capital Partners’ portfolio, it is filled with good-sized, not huge, merchants of all stripes.” More than 40% of its portfolio includes convenience stores, furniture retailers, multichannel marketers, and so on. “Sun Capital has a stable of merchants that focus on Middle America,” he says.

In fact, Rose adds, “I hope they use the knowledge gained from one channel/product to help others because their core customer appears to be similar. There is much to learn from sharing among merchants.”

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