$4.2B FOWL PLAY!
Oaktree chick deal
Howard Marks made a fortune on this deal.
The billionaire’s hedge fund Oaktree Capital on Thursday called the buyout of chickenparts distributor AdvancePierre Foods the “standout” investment of its 22-year history.
The fund, which manages $100 billion in assets, this week sold AdvancePierre to meatprocessing giant Tyson Foods for $4.2 billion including debt — a markup equal to 23 times the fund’s invested capital that generated $2.2 billion in profits.
Yet, if not for a gutsy decision in 2015, when Oaktree pulled the plug on an auction of AdvancePierre, the investment would not have gone nearly as well.
Originally, in 2008, Oaktree paid $170 million for an 80-percent stake in the company that sells stuffed breasts, chicken fingers and other poultry products to food services, schools and convenience stores.
Seven years later, Oaktree was poised to take in about $1 billion from an auction — a tidy profit — but in the closing weeks of the process the Department of Agriculture announced a recall of 1.7 million pounds of raw stuffed-chicken products from AdvancePierre’s Barber Foods division.
Marks thought the news would depress bids, which were expected to comein at $2 billion to $2.4 billion, a source with direct knowledge of the situation said. Oaktree hadalso just replaced the AdvancePierre chief executive.
“I think as they got toward the end of the process, they saw they had a great business and did not need to rush a sale,” the source said.
Turns out the risk of abandoning the auction was worth it.
Oaktree took AdvancePierre public in 2016 at a valuation of $2.7 billion, eventually reducing its stake to 42 percent.
On Thursday, Oaktree CoChair Bruce Karsh boasted over this week’s $4.2 billion bonanza.
“[It] is even more astounding to note that this is not a high-tech company, but a prosaic food producer and distributor,” Karsh said.
Distressed investor Oaktree in 2008 bought Pierre Foods out of bankruptcy, and then acquired rival Advance Foods and combined the businesses.
“They identified an attractive distressed for control opportunity, made multiple bolt-on acquisitions and one transformational one, and most importantly, added value to this portfolio company through hands-on financial and operational expertise,” Karsh said.