The third time is indeed a charm for Arbor Investments Management.
The Chicago midmarket firm, which focuses on the food and beverage industries, is returning all of the capital it invested so far from its third fund with the sale of a single company, the third time in Arbor’s history it has returned all of a fund’s invested capital with one deal.
This time, Arbor has closed a deal, announced late last month, to sell Columbus Manufacturing Inc., which produces deli meats and salami, to Spam maker Hormel Foods Corp. for about $850 million. The exit is generating a 7.7-times gross return on capital to Arbor’s investors and will return more than 100% of the capital the firm has drawn down so far from its third fund, said a person with knowledge of the portfolio. Arbor Investments III LP closed with $400 million in 2012.
Arbor initially invested some $60 million of equity in Columbus in 2012, the first deal the firm backed out of Fund III. The company’s sale also marks the first exit from the vehicle, which still has nine companies remaining in its portfolio. They include specialty foods producer DPI Specialty Foods Inc.; baked goods producer Le Petit Pain Holdings LLC, which does business as Rise Baking Co.; and food products and custom ingredient maker Concord Foods Inc.
Although it is unusual for a buyout firm to return the lion’s share of a fund with one exit, Arbor has accomplished the feat at least twice before.
In 2015, the firm sold Gold Standard Baking LLC to fellow private-equity firm Tricor Pacific Capital, generating a 9.4-times gross return of capital, WSJ Pro Private Equity reported at the time. That deal returned more than 100% of the invested capital from Arbor’s second fund, said the person. That fund closed with $170 million in 2007, according to a news release at the time.
The firm also recouped all of the money and then some for its debut fund from the 2010 sale of Great Kitchens Inc., which returned some 17-times the firm’s initial investment.
Arbor is investing from Arbor Investments IV LP, which wrapped up in 2016 with $765 million. The firm also raised $125 million for its first captive subordinated debt fund last year.
By Laura Kreutzer