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Lion Capital in advanced talks over break-up of Findus

6 Feb 2012

Consumer-focused private equity firm Lion Capital is in advanced talks regarding the break up of UK-based frozen food maker Findus in an effort to avoid breaking the company’s debt covenants.

According to the Financial Times, the sale of the company’s Nordic division could net the firm with between €700m and €800m, which will be used to pay down the group’s £721m debt.

The sale, which is being advised by Rothschild, has attracted attention from three consumer goods groups, including Swiss food giant Nestlé, Norway’s Orkla, and Lerøy Seafood Group, Norway’s largest seafood exporter by revenues.

The firm is hoping to come to an agreement with one of the buyers within the next month, which will stave off a breach of the terms of the group’s debt load when it matures at the end of the year.

Lion Capital was reportedly looking to break up Findus in order to sell the group’s Nordic operations in October last year, but stopped discussions soon after. The possibility of a breach of the company’s debt covenants reignited talks just before Christmas.

The company’s Nordic operations are widely regarded as its flagship division, as it enjoys a healthy share of the frozen food market in Norway, Finland and Sweden where more than £1.1bn of total sales were generated over the past year.

However, the company’s UK operations have struggled under the weight of price pressures from retail buyers, currency volatility and the increasingly high cost of fish and other base ingredients.

Findus posted a net loss of £151.6m in 2010 due to the high interest payments on its debt, which forced it to cut jobs and close manufacturing sites.

Lion Capital bought Findus in 2008 for £1.1bn. The company made a loss of £151.6m in 2010 due to the high interest payments it had to pay on its £721m debt. Findus employs more than 6,000 people and produces 345,000 tonnes of food annually.

Lion Capital has recently struggled to maintain the performance of its portfolio companies amid a wider backdrop of economic volatility that has hit the consumer sector hard.

Last month La Senza, the embattled high street lingerie retailer backed by Lion Capital, came to an agreement with Alshaya that will see the Middle Eastern retail group rescue the company’s UK operations in a pre-pack administration deal.

Under an agreement with KPMG, the company’s administrator, the UK arm of Alshaya will gain exclusive franchise rights for the La Senza brand in the UK. Alshaya will acquire 60 of La Senza’s 146 stores and will secure around 1,100 of its 2,600 jobs.

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