Deal in Focus: Sun shines on Finlays flowers

Last week, Sun European Partners acquired flower and vegetable business Finlays Horticulture from James Finlay, including its investment, holdings and subsidiary companies Finlay Flowers UK, Finlays Fresh Produce UK, Finlays Horticulture Kenya, Finlays Horticulture Tanzania, Omniflora, Finlay Flowers BV, FV SeleQt, Dudutech and Finlays Horticulture South Africa.

The deal is thought to value the business at around £100m. Finlays will retain its flower farm business in Kericho, Finlay Flowers, located within its tea estates in Kenya.

The business was introduced to Sun by corporate finance house Stamford Partners. According to Paul Daccus, managing partner at Sun European, the GP won the competitive process because it was able to move quickly and was willing to fully finance the deal. "Also, this deal required flexibility in terms of how the business was being carved out. It was a complex transaction and we were willing to work with the vendors so that they got what they wanted from it," he says.

Therefore, Sun European will be looking to refinance the company once the deal has been cleared by the competition authorities, which is expected to happen by December.

Established in 1750, Finlays Horticulture grows, packages and distributes cut flowers and prepared fresh vegetables to UK retailers, including Tesco, Marks & Spencer, Sainsbury's and Waitrose. Its produce is grown in Africa and exported to Europe.

The GP was attracted to the business because of its market-leading status: "Customers would miss it if it wasn't around," says Daccus. "And, it differentiates itself from its peer group by being fully vertically integrated. So when speaking to big customers, it can really push the providence of the product; that's a key feature."

Furthermore, Finlays' vegetable business is not involved in commodity vegetable production, according to Daccus: "It offers prepared and packaged specialty vegetables including asparagus and green beans, which speak to continued demand for healthier foods and convenience products."

Flower power
Following the transaction, Sun aims to develop the company by investing in Finlays' farms. "A key focus will be the continued investment in the farms and optimising yields by making sure irrigation is sound, and maximising covered production to enable production all year round," says Daccus.

Sun will also support the business by selling more of its flower produce across Europe – at the moment sales are mainly UK-based – and by developing new products on the vegetable side.

This deal sees Sun take a break from its historical focus on turnaround transactions - having notably purchased UK bed retailer Dreams from administrators EY, and clothing retailer Bonmarche from administrators KPMG. This latest transaction sees Sun purchasing a healthy business and paying a larger ticket price.

Primrose equity
The plant and vegetable space appears to be increasingly attractive to private equity, with KKR investing $200m in Ethiopian rose farm Afriflora in 2014, and BC Partners picking up Dutch flower breeder Dümmen Orange just last week.

Says Daccus: "It does seem to be an active area. The increased activity is likely driven by the sector's neat end-market growth characteristics. And, when you buy one of these companies, you're acquiring the underlying assets of farms where there are good opportunities for operational efficiencies and yield maximisation. There's lots that can be done with these sorts of companies, which makes them appealing to private equity."

And because of its attractiveness, Daccus believes that when Sun looks to exit, Finlays will likely appeal to another private equity buyer, or to farm trading groups or overseas buyers looking for exposure in Africa.

People
Sun European Partners – Paul Daccus

Advisers
Equity – EY (Financial due diligence); Kirkland & Ellis (Legal).
Vendor – Stamford Partners (Corporate finance).

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• Buyouts
• UK / Ireland
• Deal in focus
• Top story
• Sun European Partners
• unq2015nov