Paine Schwartz Partners Makes Strategic Flavors Investment
November 15, 2017
Leading food and ag-focused private equity firm, Paine Schwartz Partners announced it has made an undisclosed strategic investment in Lyons Magnus Inc. – a top developer and manufacturer of fruit-based flavor solutions for the dairy, foodservice, and healthcare industries.
“In Lyons Magnus, we are making a strategic investment in an exciting growth platform in the foodservice sector that is a strong fit with our approach to investing in the food and agribusiness industry,” said Kevin Schwartz, CEO and founding partner of Paine Schwartz.
Founded in 1852 in San Francisco, California by Ernest G. Lyons, Lyons Magnus was initially named E.G. Lyons & Co. and was a wholesale seller of wines, liquors, syrups, cordials, and bitters. Today, the company has been owned by the Smittcamp family for the past 46 years, and has grown to be a leading producer of beverage syrups, smoothies, juices, toppings, syrups, and other fruit-based products that it sells to national restaurant chains, healthcare institutions, and foodservice distributors. Now headquartered in Fresno, California, Lyons Magnus also has manufacturing and warehouse facilities in Walton, Kentucky, and has build out extensive R&D capabilities and best-in-class quality and safety protocols enabling it to deliver innovative offerings and custom product formulations.
“We know the Smittcamp family well and have great admiration for what they have done to build the Lyons Magnus business,” said Schwartz. “We believe Lyons Magnus is well-positioned to meet the growing demand for innovative foodservice products and we are extremely excited about the opportunity to partner with Bob and the rest of the management team to expand upon the Company’s tremendous heritage and strong market positions to drive the next stage of development.”
The global flavors segment has seen its fair share of consolidation and dynamic activity within the past few years as global players position themselves to expand beyond commodities and up the production chain in order to gain a foothold in higher margin businesses, while companies and investors seek to capitalize upon consumer trends that lean toward flavorful but healthy foods – trends that have made the natural flavors category one of the fastest growing in both developed and emerging markets.
The most notable deal in the category happened in July 2014, when U.S.-based Archer Daniels Midland (ADM) beat a field of rival bidders to acquire Wild Flavors, a producer of flavorings for cereals, ice cream, dairy, and confectionary items for $3.1 billion from the U.S.-based private equity firm Kohlberg Kravis Roberts and Dr. Hans-Peter Wild. Once complete, the combination of ADM and Wild Flavors was expected to result in global sales of $2.5 billion.
ADM went on in October 2015 to expand its flavors portfolio with the addition of the natural and organic flavors company, Linsalata Capital Partners-backed Eatem Foods for an undisclosed amount, and in May of last year ADM built up its flavors business even further with the acquisition of Amazon Flavors – Brazil’s top producer of natural extracts, emulsions, and compounds.
Through these deals, over the course of three years, ADM build out a new Wild Flavors & Specialty Ingredients business unit which includes the ADM specialty proteins line, emulsifiers, edible beans, natural health and nutrition, soluble fibers, polyols, hydrocolloids, along with the Wild Flavors business.
Last year saw two other significant deals in the flavor space when Monster Beverage Corporation announce that it agreed to acquire its long-term flavor supplier, American Fruits & Flavors (AFF), for $690 million, and International Flavors & Fragrances Inc. (IFF), the third largest flavors company in the world behind Givaudan and Firmenich, agreed to acquire Philadelphia-based flavors company, David Michael & Co., for an undisclosed amount.
Although financial terms of the deal were not released, IFF expected the acquisition to add about $85 million in revenue to its bottom line in 2017 and to support the company’s goal of realizing its Vision 2020 business strategy which includes reaching targeted sales of between $500 million and $1 billion through mergers and acquisitions.
The Next Level
From its offices in New York and California, Paine Schwartz Partners has deployed approximately $2 billion across 40-plus investments in food and ag businesses, with a focus on upstream allocations in the supply chain.
“The food and ag industry is both huge, with almost 9 percent of total global output, and attractive, in that it has been the fastest growing major segment of the global economy for a number of years, yet is very underrepresented from an institutional capital investment perspective,” Kevin Schwartz told GAI News in a recent interview.
“We think there’s huge potential in this sector,” stated Schwartz. “There’s no limit to the number or scale of the opportunities for investment”
For Lyons Magnus, having the expertise of Paine Schwartz in its corner will give the company the backing it needs to bring its operation to the next level, according to Smittcamp.
“Paine Schwartz brings extensive experience and understanding of the fruit business and the foodservice industry,” said Smittcamp. “I want to thank our strong team of dedicated and long-term employees, who played an important role in building Lyons Magnus into an industry leader. With the benefit of additional expertise and resources from Paine Schwartz, we look forward to continuing to provide customers with the high quality and unique portfolio of products they expect from us… I believe that our decision to partner with the team from Paine Schwartz will help take our Company to the next level.”
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