R&R looks to next phase in £716m takeover

R&R said its management team, headed by chairman and chief executive James Lambert, will stay on to take the North Yorkshire business on to the next phase of its development. They will also invest in the company.

This development will involve buying more brands to complement the group’s fast-expanding portfolio.

The deal follows the announcement by R&R earlier this month that it is to buy rival ice cream manufacturer Fredericks Dairies for £49m.

Fredericks has the licence to manufacture ice cream brands such as Cadbury, Barratt’s, Britvic, Del Monte and Vimto.

Such a deal is very much in keeping with PAI’s preferred investments – buying into companies that make products for well-known brands.

Last December it invested £234m in Italian company Marcolin, which makes sunglasses for various fashion brands such as Diesel, John Galliano and Tom Ford.

PAI hopes to expand R&R portfolio in a similar way as the group expands its brands across Europe and possibly further overseas.

The French firm is buying R&R from Oaktree Capital Management and the deal is subject to regulatory approvals and financing conditions.

PAI said it will support R&R through its next phase of growth, investing in the expansion of the company’s international footprint and consumer brands.

The consumer sector is one of PAI’s core target areas for investment. It has invested in a number of leading food and consumer businesses including Yoplait, one of the top 20 global consumer brands and United Biscuits, the largest biscuits manufacturer in the UK.

Mr Lambert said: “We are very excited to be partnering with PAI and working together on our next phase of development as we continue with our growth strategy across our brands.”

Colm O’Sullivan, partner at PAI Partners, said: “R&R is a market-leading company with a strong portfolio of innovative products and excellent potential to expand in the UK and internationally.

“The food and consumer brands sector is a core area of investment focus and expertise for PAI. We look forward to working closely with the company’s management and supporting the company’s continued growth.” The deal is one of Yorkshire’s biggest buyouts.

South Yorkshire-based construction group Keepmoat was sold for £783m – the region’s largest ever private equity deal – in 2007 and in 2010 private equity group Advent International bought Doncaster-based furniture specialist DFS from founder Lord Kirkham, who sold the retailer for more than £400m.

PAI’s acquisition of R&R will be partly financed by a form of debt popular during the credit boom which is now making a comeback in Europe.

It has been controversial in the past because of its relatively high risk, but analysts believe R&R’s low debts and highly cash generative model will counteract this.

The deal will be financed by a £213m five-year Payment-In-Kind Toggle note.

This is a form of debt that allow borrowers to pay interest in more debt instead of cash, though they must repay in full when the bonds are due.

R&R said last October it was exploring strategic options that could include a sale.

Founded in 1985, R&R is Europe’s leading supplier of own-label ice cream with brands such as Nestle, Skinny Cow, YooMoo frozen yoghurt, Kelly’s of Cornwall and Disney.

R&R recently launched a range of Mondelez International brands including Milka, Toblerone, Daim, Oreo and Philadelphia across 10 European countries.

Oaktree bought Richmond Foods in 2006 and merged it with German ice cream firm Roncadin to form R&R. The company has 11 production sites across the UK and mainland Europe.

Returning after a seven-year gap

The acquisition of R&R will be PAI Partner’s first UK deal since it bought United Biscuits, the company behind McVitie’s Digestives, Penguin, Jaffa Cakes, Go Ahead! KP, Hula Hoops and Skips, in a joint deal with Blackstone for £1.7bn in 2006.

Its more recent investments have been in France, Italy, Switzerland, Germany and the Netherlands.

In 2005 it bought Kwik-Fit, the European market leader in fast-fit car services, for £779m. It sold it for £637m to a Japanese conglomerate earlier this year.

PAI is France’s largest private equity investor. It manages and advises private equity funds with a total value of £3.4bn.