Alcuin takes a bite out of Krispy Kreme

Susannah Birkwood
17 October 2011

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Alcuin Capital Partners has backed the ТЃ25m management buyout of doughnut retailer Krispy Kreme UK.

Under Alcuin's ownership, Krispy Kreme plans to focus on growing its core business of making doughnuts and coffee, geographically expanding its retail and wholesale operations and retaining high calibre staff. It will continue to roll out its hub and spoke distribution model, which combines the company's town centre coffee bars and branded cabinets with its Hotlight stores, which showcase fresh doughnut production. By 2015, it aims to take its total number of UK sites to 80, its number of cabinets to 400 and its number of employees to more than 1,500.

Alcuin has acquired a majority shareholding in the firm, while the existing management team now holds a significantly increased stake. The private equity firm was favoured for the deal because it shares the company's ambitions for the future and has significant experience in supporting growing businesses.

Krispy Kreme represents the fifth acquisition made by Alcuin's third fund, which announced a first close on £81m in January. It attracted the private equity firm due to the perceived growth potential of its market niche.

The transaction was instigated following an introduction by corporate finance adviser Latimer Corporation and constitutes an exit for UK-based company Chesire and Kent.

Debt
Santander provided a senior debt package to support the deal, while mezzanine debt was supplied by Indigo Capital.

Company
Having entered the UK market in October 2003, Krispy Kreme UK currently runs 45 doughnut stores and more than 350 cabinets, which it operates through retail partners such as Tesco. Headquartered in Surrey, it generated an EBITDA of £3.4m on revenues of £33.4m last year.

People
Partner Mark Storey led the deal for Alcuin and joins the company's board as chairman. Richard Cheshire and Rob Hunt are the joint managing directors of Krispy Kreme.

Advisers
Equity – Tenon, Rebecca Guerin (Financial due diligence); Jones Day, Adam Greaves (Legal).
Company – Latimer Corporation, Duncan Gee (Corporate finance); Shoosmiths, Emma Gibson (Legal); PricewaterhouseCoopers, Kevin Morris (Tax).
Vendor – Macfarlanes, Charles Meek, Rachael Leith (Legal).