Sale of R&R set to be biggest ever buyout seen in Yorkshire

THE planned sale of R&R Ice Cream early next year is on course to be Yorkshire’s biggest-ever buyout.

First-round bids are due in this week for a majority stake in Europe’s largest own-label ice cream manufacturer.

The sale by US investment fund Oaktree Capital is attracting major interest from private equity heavyweights.

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Suitors are understood to include Apax Partners, Clayton, Dubilier & Rice and Bain Capital, the buyout firm co-founded by Republican presidential candidate Mitt Romney.

The resulting deal is likely to be “pushing one billion euros”, according to a well-placed source.

But the management, led by executive chairman James Lambert, has not ruled out a return to the stock exchange.

Oaktree holds an 82 per cent stake in R&R after taking it private in 2005. The management owns the rest.

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Mr Lambert told the Yorkshire Post that R&R’s opportunities are “probably bigger than the balance sheet can stand”.

He said: “The option is either to put the business up for sale now or to float the business within a couple of years.

“I’m absolutely evenly split between one and the other. It does not really matter to me because the business is big enough, strong enough and robust enough.”

Turnover for the year ending December 2011 broke through the 500m euro barrier for the first time, up from 450m euros the previous year.

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Core earnings increased to 66.2m euros in 2011, a rise of 2.3m from 2010.

Mr Lambert said sales will rise next year with the full launch of the deal agreed with US firm Kraft to launch its brands across 10 European countries. “I would expect to see a real uplift because of it,” he added.

Kraft brands include Milka, Daim, Toblerone and Oreo.

Mr Lambert said the financing process will make sure that R&R has “the right capital structure to take advantage of all the opportunities that are available from Turkey to Portugal”.

He added: “That will give us the platform for increasing the level of growth of the business over the next three to five years.

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“It’s making sure we have the right structure underpinning the growth of the business.” Industry insiders say the company’s core earnings are now approaching 105m euros and that Oaktree is seeking a minimum multiple of nine, which would value the business at 945m euros.

In the summer, R&R bought Italy’s leading own-label ice cream manufacturer, Eskigel, for around 77m euros, its 16th acquisition since 1995.

Eskigel operates from a factory at Terni, north of Rome, and last year had sales of 81m euros.

R&R funded the Italian acquisition through the remainder of a loan note issued in November 2010, which raised 350m euros.

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The fundraising effort was five times oversubscribed, said Mr Lambert.

The acquisition was the latest step in the company’s plan to become the lead consolidator for ice cream manufacturing in Europe.

Mr Lambert said many industry players are unprofitable and require a lot of capital. This plays to R&R’s advantage.

“The cost of debt has dropped enormously, partly because of quantitative easing and partly because you are getting nothing for your money sitting in the bank,” he added.

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Mr Lambert has predicted that the low cost of capital for large businesses will led to a resurgence in manufacturing in the West.

He also spoken out in favour of private equity ownership, having led the company through its years as a listed business.

“I like private equity because it means the management of the business and investors are absolutely aligned together,” he has said.

“The only way to make returns is to invest and grow the business. You don’t have to spend a lot of time running around the City. Management really focuses on growing the business.”

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R&R has increased its turnover from 150m euros to 650m euros since going private in 2005.

Alongside the arrangement with Kraft, R&R also holds licensing agreements with Nestlé, Disney and GlaxoSmithKline and a distribution deal with Mars.

The company also invested in a 25 per cent stake in YooMoo International, the UK frozen yoghurt brand.

R&R invested nearly £6.7m at its site in Northallerton last year and expects to invest a similar amount this year.

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The company employs around 800 people in Yorkshire in a total workforce of around 3,500.

R&R won the Board of the Year award in Variety’s Yorkshire Business Awards on Friday. See Page 5 for full coverage.

Private equity leads the chase

THE chance to buy an 82 per cent stake in Europe’s most successful food manufacturer has attracted the attention of leading private equity firms.

Apax Partners, Clayton, Dubilier & Rice and Bain Capital are among those said to be assessing bids for R&R Ice Cream.

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Apax is based in London and has raised total funds of £22.4bn.

At 34 years old, Clayton, Dubilier & Rice is one of the buyout industry’s oldest players.

It is based in New York.

Republican presidential candidate Mitt Romney helped found Bain Capital in 1984.

The Boston-based firm manages assets worth $66bn.

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