Pacific Equity Partners

Last updated

Pacific Equity Partners
Company type Proprietary limited company
Industry Private Equity
Founded1998;26 years ago (1998)
Founders
  • Simon Pillar
  • Rickard Gardell
  • Paul McCullagh
  • Tim Sims
Headquarters Sydney, Australia
Products
AUM A$10 billion (2022)
Website www.pep.com.au

Pacific Equity Partners (PEP) is a private equity investment firm focusing on transactions in Australia and New Zealand. PEP invests across a range of industries and sectors and in turnaround and growth capital transactions.

Contents

The firm is based in Sydney, Australia, and was founded in 1998 by Rickard Gardell, Paul McCullagh, Simon Pillar and Tim Sims. All but McCullagh previously worked together as executives at Bain & Company. [1] [2]

The firm has generated several buyout funds for investors. By 2022, these funds had $8.6 billion under management. [3] The launch of a continuation fund that year lifted that figure to $10 billion, making the company Australia's largest private equity firm, according to Australian Financial Review . [4]

In 2023, the firm announced its first "Gateway fund" which it described as a mechanism by which private investors may access global private equity investing, with reduced initial investment requirements. [5] In this approach, capital is distributed into PEP funds alongside funds from high-end global private equity firms such as Bain Capital and Leonard Green & Partners. [6]

The firm is reported to be launching its seventh buyout fund (Fund VII) sometime in 2024, with current investment expectations of A$3 billion, which would make it one of the largest Australian funds of its kind. [7]

Investments

Since its establishment in 1998, the firm is said to have completed 40 private equity buyouts by 2023. [8]

Apart from buying and operating large companies, PEP has made 100 "bolt-on" acquisitions in the same 25-period, these are smaller firms, bought and merged with portfolio companies, for their strategic value. [9] PEP claims to have "at least doubled" investor monies in 12 of its previous 13 deals, which have included the purchase, restructure and resale of several Australian companies such as Spotless and Hoyts. [8] [10]

Some of the firm's recent investments have included Patties Foods, [11] iNova Pharmaceuticals, [12] the medical devices group LifeHealthcare, [13] the smart metering company IntelliHUB, [14] and Evolution Healthcare. [15] (The sale of Patties being the one of 13 resales where they did not meet their "doubled" standard, due to low post-Covid earnings for that food group.) [16]

Investments as of 2024

The following schedule indicates the businesses PEP has acquired and which they continue to own and manage, current to February 2024.

InvestmentYear AcquiredDescription of TransactionRef.
Zenith Energy2020Public to Private. Agreed in March 2020, with PEP acquiring the thermal and sustainable power company at $1.01 per share, valuing Zenith's equity at A$150 million at that point. Business now held in the PEP fund known as "SAF I." [17] [18]
Magentus2020Public to Private. The health technology formerly known as Citadel Group ASX was delisted in deal led by PEP, as part of a $500m transaction. Business now held in a fund known as Fund VI. [19] [20]
Modern Star2020Secondary buyout. Educational resources company acquired in September 2020, valuing its assets at $600 million. Now held in a PEP fund known as Fund VI. [21]
Healthe Care2021Corporate Carve-out. The private hospital business had been part of China-owned Luye Pharma Group (which retained the Mental Health service arm, renaming it Aurora Healthcare). Now held in a PEP fund known as Fund VI. [22]
Agright2022Private Vendor. New Zealand based poultry business acquired into the secure assets fund known as SAF I. [23] [7]

[24]

Intellihub2022Secondary. The 'smart metering' business Smart Metering Fund. Held in the PEP fund known as SAF II. [25] [26]
Cranky Health2022Private Vendor. PEP acquired controlling stake in the weight loss products business, with Adam MacDougall retaining his minority stake. Valuation said to be $200 million, or 10 to 12 times earnings. Held in Fund VI. [27]
Altus Traffic2022Private Vendor. Traffic management business sold by its founder and chair David Lundberg, for what was said to be A$200, then on-sold 50% of equity to Brookfield Corporation at $3bn including debt. Stake is held in Fund VI. [28]
iNova Pharmaceuticals2022Corporate Multinational Carve-Out. Co-investment with TPG Inc. in the consumer healthcare products, its value estimated at A$2billion. Held in fund known as Fund VI. [8] [29]
UP Education2023Secondary. Australasian private education provider with 30 campuses was first purchased by PEP in 2016, following leveraged buy out, valued at NZ$540 in 2023, it has been held in the fund known as Education SPV. [30] [31] [32]

Past investments

The firm's previous investments were dominated by companies in the food and beverages sector, such as Independent Liquor (sold to Asahi Breweries in 2011), [33] Griffin's Foods (acquired from Danone in 2006 and sold to Universal Robina in 2014), [34] Frucor (sold to Suntory in 2008), Peters Ice Cream (sold to Froneri in 2014) and Tegel Foods (acquired in 2005 from Heinz and sold to Affinity Equity Partners in 2011). [35]

Previous Investments
InvestmentsYear AcquiredDescription of TransactionRef.
Hoyts2007Purchase valued Hoyts' Australian and New Zealand operations at $440 million, then on-sold to Wanda Cinemas in 2015. [36]
Independent Liquor2006Purchased in partnership with Unitas Capital for $600 million, later sold to Asahi Breweries for $1.3 billion. [37]
Griffin's Foods 2006Acquired from Danone in 2006 and sold to Universal Robina in 2014. [38]
Frucor 1998The first investment made by the firm. Purchased for $NZ67 million, later sold to Suntory in 2008. [39]
Peters Ice Cream 2012Terms of the deal not disclosed. Sold to Froneri in 2014 for just under $450 million. [40]
Tegel Foods 2005Acquired from Heinz for $250 million, later sold to Affinity Equity Partners in 2011 for $600 million. [41]
WINconnect2019Purchase of community energy network provider for deal understood to be worth around $100 million. Purchased by Origin Energy in 2021. [42] [43]
Manuka Health2015Sold in 2018 for $NZ300 million. PEP first purchased Manuka in 2015 and made key changes including expanding the company's operations and leading an industry reform to standardise honey grades, allowing better transparency on quality and reducing counterfeiting. This work gained industry recognition in 2018 for quality management and responsible investing. [44] [45]
Allied Pinnacle2015-17Acquired Pinnacle Bakery & Integrated Solutions ($200 million), a maker of bakery ingredients and frozen baked products, from Kerry Group in 2015, before adding Allied Mills ($455 million, including debt) in March 2017. Sold to Japan's Nissin Foods in February 2019. [46]
ACG 2015NZ private education provider. Divested in 2018 to UK-based Inspired Education Holdings. [47] [48]

History and culture

Pacific Equity Partners was founded in Sydney, Australia, in 1998. [49] The founders came from the consulting and banking sectors: Rickard Gardell, Tim Sims, Simon Pillar all from Bain & Company; and Paul McCullagh, from Salomon Brothers. [50] While McCullagh stepped back from management operations in 2017, as of 2023 all four had remained in the partnership. [50]

Some industry commentators have described PEP as having an 'apprenticeship' culture, with long-standing founders and senior staff deliberately hiring junior employees, as it enables cultural formation within the firm over a long tenure. [8] Staff longevity and team-based approaches to deals, likened to a management consulting ethos, may have helped make the firm distinctive in its market. [51] [8]

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References

  1. ↑ "Australia's Private-Equity Deals for the New Year". Wall Street Journal. Retrieved 15 June 2022.
  2. ↑ Wilson, Drew. "Privately Speaking: Tim Sims of Pacific Equity Partners". Private Equity International. Retrieved 15 June 2022.
  3. ↑ Thomson, James (2 May 2022). "PEP's $10b moment heralds private equity's new era". Australian Financial Review .
  4. ↑ Mendoza, Carmela (24 July 2018). "Pacific Equity Partners on why the Australian mid-market is thriving". Private Equity International. Retrieved 10 April 2019.
  5. ↑ "Pacific Equity Partners invites the wealthy into 'privileged' PE club". Australian Financial Review. 28 May 2023. Retrieved 23 February 2024.
  6. ↑ Weinman, Aaron (7 November 2023). "Fund that returned 23pc targets billions in investment". Australian Financial Review. Retrieved 19 November 2023.
  7. 1 2 "PEP prepares biggest fund to date, pitches proven money-making prowess". Australian Financial Review. 30 October 2023. Retrieved 23 February 2024.
  8. 1 2 3 4 5 "The 'apprenticeship' culture that drives Australia's biggest PE firm, Pacific Equity Partners". Australian Financial Review. 30 July 2023. Retrieved 14 September 2023.
  9. ↑ Mendoza, Carmen. "Pacific Equity Partners on why the Australian mid-market is thriving". Private Equity International. PEI Media.
  10. ↑ Cole, BRETT (24 February 2014). "PEP yet to ask banks for Spotless pitches". The Australian.
  11. ↑ “PEP in advanced discussions to acquire ASX listed Patties Foods” "Australian Financial Review", 29 May 2016.
  12. ↑ “iNova sold to PEP, the Carlyle Group” "Australian Financial Review", 9 June 2017.
  13. ↑ “Allens advises PEP on acquisition of LifeHealthcare” from Allens Media Release, 25 May 2018.
  14. ↑ “Landis+Gyr and Pacific Equity Partners announce joint venture for acquisition of acumen metering business” from Landis+Gyr media release, 24 May 2018.
  15. ↑ “North Island Hospitals sold to new Australian Owners” in Stuff.co.nz on 25 September 2018.
  16. ↑ Carter, Bridget (2 February 2022). "Pandemic takes toll on consumer goods deals; Patties sale pushed back". The Australian. Retrieved 14 September 2023.
  17. ↑ "Pacific Equity Partners' gun SAF team seek exclusivity on $1b deal". Australian Financial Review. 20 July 2023. Retrieved 23 February 2024.
  18. ↑ "Private equity comes for listed power play Zenith Energy". Australian Financial Review. 8 March 2020. Retrieved 23 February 2024.
  19. ↑ Stensholt, John (12 June 2023). "Catching 'falling knives' delivers $1bn success". The Australian.
  20. ↑ Leung, Edith (20 February 2024). "Q&A: Australia's Pacific Equity Partners on take-privates, carve-outs, continuation funds". ION Analytics. Retrieved 23 February 2024.
  21. ↑ "Biebs alert! PEP taps new fund, two lenders for Modern Star". Australian Financial Review. 7 September 2020. Retrieved 23 February 2024.
  22. ↑ Carter, Bridget (11 July 2023). "Pacific Equity Partners gets ready for Aurora Healthcare auction". The Australian.
  23. ↑ Carter, Bridget (4 April 2023). "Pacific Equity Partners walks away from $900 Serenitas buy". The Australian.
  24. ↑ "PE hotshots: The top 20 under 40 in 2021". Australian Financial Review. 28 December 2021. Retrieved 23 February 2024.
  25. ↑ "ESG Loan: Intellihub's A$1.45bn green financing | IFR". IFRe. Retrieved 23 February 2024.
  26. ↑ "Pacific Equity Partners targets mid-market infrastructure decarbonisation - Clean Energy Finance Corporation". www.cefc.com.au. Retrieved 23 February 2024.
  27. ↑ "Pacific Equity Partners sips on The Man Shake owner Cranky Health". Australian Financial Review. 30 January 2022. Retrieved 23 February 2024.
  28. ↑ Loussikian, Kylar (22 August 2022). "PEP snaps up Altus Traffic, more M&A afoot". The Australian.
  29. ↑ "TPG Capital to buy iNova for $2b-plus; PEP to co-invest". Australian Financial Review. 26 July 2022. Retrieved 23 February 2024.
  30. ↑ "Overseas investment decision for case 202300267 - UP Education Bidco Limited | Toitū Te Whenua - Land Information New Zealand". www.linz.govt.nz. 23 June 2023. Retrieved 23 February 2024.
  31. ↑ "Australia's Pacific Equity Partners closes $265m continuation fund: Report". DealStreetAsia. Retrieved 23 February 2024.
  32. ↑ Croft, Lauren (10 August 2022). "Up Education Group receives NZ$540m funding injection". www.lawyersweekly.com.au. Retrieved 23 February 2024.
  33. ↑ "Asahi to Buy New Zealand Liquor Company". DealBook. 18 August 2011. Retrieved 9 April 2019.
  34. ↑ "Pacific Equity buys Griffin's Foods". The Age. 1 April 2006. Retrieved 9 April 2019.
  35. ↑ "Pacific Equity Mulling Options for Tegel Foods". DealBook. 20 August 2010. Retrieved 9 April 2019.
  36. ↑ "Hoyts to be sold to private equity group". ABC News. 24 September 2007. Retrieved 18 March 2024.
  37. ↑ Dealbook (18 August 2011). "Asahi to Buy New Zealand Liquor Company". DealBook. Retrieved 18 March 2024.
  38. ↑ "Pacific Equity buys Griffin's Foods". The Age. 1 April 2006. Retrieved 18 March 2024.
  39. ↑ Anand, Sameera (27 October 2008). "Suntory wins Danone's Frucor business". FinanceAsia. Retrieved 18 March 2024.
  40. ↑ "PEP jettisons Peters Ice Cream for close to $450m". Australian Financial Review. 27 May 2014. Retrieved 18 March 2024.
  41. ↑ McNabb, Denise. "PEP eyes big NZ poultry investment". businessdesk.co.nz. Retrieved 18 March 2024.
  42. ↑ Evans, Lauren (20 December 2021). "Origin Energy (ASX:ORG) to acquire WINconnect for $42.4m". Finance News Network. Retrieved 18 March 2024.
  43. ↑ "PEP gets energised ahead of long Village Roadshow tilt". Australian Financial Review. 19 December 2019. Retrieved 18 March 2024.
  44. ↑ "AVCJ Awards 2018: Responsible Investment: Manuka Health | AVCJ". www.avcj.com. 18 December 2018. Retrieved 18 March 2024.
  45. ↑ "Pacific Equity Partners secures sale for Manuka Health; ANZ advises buyer". Australian Financial Review. 27 September 2018. Retrieved 18 March 2024.
  46. ↑ "PEP secures just under $1b for flour, baked goods maker Allied Pinnacle". Australian Financial Review. 27 February 2019. Retrieved 18 March 2024.
  47. ↑ "Education business returns capital despite pandemic". Private Equity Media. Retrieved 18 March 2024.
  48. ↑ Hancock, Farah (22 June 2018). "Sale rumoured for prestige schools". Newsroom. Retrieved 18 March 2024.
  49. ↑ "This float could create Australia's first private equity billionaire". Australian Financial Review. 3 May 2022. Retrieved 18 October 2023.
  50. 1 2 Glascow, Will; Lacy, Christine (21 December 2017). "Paul McCullagh steps back at Pacific Equity Partners". The Australian.
  51. ↑ "Where I'm putting the money: Pacific Equity Partners' Tim Sims on why he thinks we're past the worst". Forbes Australia. 3 July 2023. Retrieved 23 February 2024.
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