Deal in Focus: Idea Capital backs Italian drinks maker Lurisia

Following the discovery of a new water spring in the Maritime Alps on the border with France, Italian beverage producer Lurisia turned to external financing to double its production and boost international expansion. In January 2017, Milan-based private equity house Idea Capital Funds acquired a third of Acque Minerali, Lurisia’s holding company, via the 2014-vintage fund Taste of Italy. The vehicle is the GP’s first fund exclusively dedicated to the food and agri-business sector and held a final close €18m above its €200m target.

The business was previously owned by Italian gourmet food corporate Eataly and the Invernizzi family with a 50% stake each. Following the deal, its shareholder base will be equally split between the three investors.

According to Idea Capital managing director Pierluca Antolini, the new water spring should double the water flow volume of the original spring managed by the company. By exploiting the spring, which is subject to the authorities' approval, Lurisia expects to double its production starting in 2018, and the current shareholders are keen on providing additional capital to expand the company's production line with the aim of doubling revenues, says Antolini. The company generated a €21.1m turnover in 2015, with €5.5m of EBITDA and €4.6m in net debt, up from a turnover of €19.5m the previous year, with EBITDA of €4.5m.

Ramping up
Nonetheless, the transaction did not represent a capital increase for the business, due to the company’s positive net cash-debt ratio of €7m posted at the time of the transaction, unquote" understands. According to Antolini, the shareholders will initially use the capital on the balance sheet for the expansion plan, which is expected to consist of a €5-6m capital injection across a two-year period. Furthermore, the investors are keen on providing further capital upon completion of the plan to boost international expansion, which will include add-on acquisitions.

Following the deal, shareholders intend to nominate a new CEO for the business, whose name has not yet been disclosed. According to Antolini, the individual comes from a multinational corporate and will take a seat on the company's board in March 2017. Alongside this appointment, Antolini will also sit on the board, alongside Idea Capital investment manager Stefania Boroli.

Currently, mineral water production accounts for 60% of the company's sales, while other beverages, including sparkling juices, chinotto and craft beers, make up the remaining part of the business. According to Antolini, Lurisia’s mineral water production is aimed at the higher end of the market, including luxury hotels, restaurants and retail distributors, in Italy as well as internationally.

"Although water is not easy to export, due to its volume and weight, Lurisia saw its exports increase constantly during the last couple of years," says Antolini. In 2016, "demand overcame supply and Lurisia liquidated its stock reserves for its 2016-vintage production", he says.

The shareholders aim to boost internationalisation via a systemic marketing activity and by capitalising on Eataly’s distribution chain. To date, Eataly represents 8-9% of Lurisia’s revenues, says Antolini. However, Eataly is about to expand across the US, opening new stores in Los Angeles and Las Vegas, as well as in Toronto, Moscow, Doha and Trieste.

As part of this expansion plan, Eataly aims to increase its revenues from €400m to €700m in 2017 and is reportedly eyeing the float of a 30-35% stake in 2018. Against this backdrop and through the support of Idea Capital's food and agri-business team, Lurisia is looking to build on this momentum.

People
Idea Capital Funds – Paolo Ceretti (CEO); Pierluca Antolini (managing director).
Eataly – Oscar Farinetti (founder); Nicola Farinetti (CEO).
Acque Minerali – Alessandro Invernizzi (CEO).

Advisers
Equity – Hilex Avvocati Associati (legal); PwC (financial due diligence, tax).
Vendors – 5 Lex (legal); Quagliarella & Associati (legal).

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• Topics
• Expansion
• Southern Europe
• Consumer
• Deal in focus
• Italy