Addo Food Group buyout loan out to select lender group

The £250 million term loan backing PAI's acquisition and merger of U.K. chilled-food groups Addo Food Group Ltd. and Winterbotham Darby & Co. Ltd. is out to a select group of lenders, according to market sources. Deutsche Bank, Jefferies and Rabobank are leading.

The deal is being guided at around L+600, with a 0% floor and offered at 96-97 sources say, adding that the deal has yet to launch formerly and it is not yet clear whether a general syndication will follow.

PAI announced the acquisitions in November, and the loan was initially pre-marketed at the end of last year guided at L+525-550, with a 0% floor at 98. This coincided, however, with the culmination of Brexit trade discussions, meaning the market for sterling assets — especially from U.K.-focused companies — suffered.

Pricing was revised for the new year. Sources say the firm has traded well through the pandemic and Christmas period, given its focus on retail customers and the increase in at-home consumption. Leverage is talked in a mid-4x area based on EBITDA of ~£50 million, sources add, and the deal comes with a leverage covenant. A £40 million revolver rounds off the debt.

The combination of Addo and Winterbotham Darby is designed to create a new U.K. chilled-food platform. Addo is a maker of chilled savory foods such as sausage rolls, pork pies, savory eggs and pasties and slices, while Winterbotham Darby produces foods such as olives and antipasti, continental meats and plant-based products. The companies will continue to be run separately but will benefit from the sharing of best practices, new-product development and supply-chain initiatives, according to a statement announcing the deal.

The company supplies all the major U.K. supermarkets where it has long and stable relationships, market sources add. Margins are said to be in line with other private-label supplies in the high-single-digit-EBITDA range, and the company has to manage costs coming from the movements in sterling, which had been under pressure last fears amid the ongoing BREXIT talks. The conclusion of these talks means the business can continue to trade on a zero-tariff basis.