Lion Capital closes restructuring despite LP disquiet

The consumer-focused buyout shop received a direct bid for frozen food business Picard, which some LPs viewed as a better option.

Lion Capital has completed a GP-led restructuring amid pushback from some limited partners.

The London-headquartered consumer-focused buyout shop lifted frozen food retailer Picard and brand development business Authentic Brands Group from its 2007- and 2010-vintage funds into a continuation vehicle, according to a statement seen by Secondaries Investor.

The election period ended on 9 December with the transaction expected to close before Christmas. The vehicle was oversubscribed, the statement noted.

According to one member of the limited partner advisory committee, Lion turned down a direct bid for Picard from London-listed asset manager ICG that was 25 percent higher than the amount limited partners would receive for the asset through the secondaries process.

The bid was made by ICG’s direct investment team, Secondaries Investor understands.

“For me what would be in the best interests of the LPs is to take [ICG’s] offer and sell the company directly. They are taking the two best assets from the two funds and rolling them into a new vehicle, which they are going to make management fees and carried interest on going forward,” the LPAC member told Secondaries Investor.

“They are creating a new vehicle which they can make money off and leaving investors at a loss,” added another LP, who does not sit on the advisory committee.

Sister publication Buyouts reported in September that Lion was working on the process with advisor Lazard.

Lyndon Lea, managing partner of Lion, said the direct bid was for one asset whereas LPs wanted a liquidity option on both. He also said there was “meaningful uncertainty” around the bid in terms of value and timing: “In order to pursue the direct offer, the LPAC had to take the risk of letting the secondary [deal] slip away.”

The LPACs of both funds approved the deals, which they would not have done had there been significant objections, he added, noting that other LPAC members had expressed satisfaction with the outcome.

According to three sources with knowledge of the GP-led deal, Glendower Capital is leading the process, which is valued at around €400 million.

According to data from Oregon Public Employees Retirement Fund, Lion Capital Fund II delivered a net internal rate of return of -7.7 percent and a total value to paid in multiple of 0.6x as of 31 March. Fund III had a net IRR of -5.6 percent and a TVPI multiple of 0.72x.

LPs across the two funds include Alberta Investment Management Corporation, Caisse de dépôt et placement du Québec and the California Public Employees’ Retirement System, according to PEI data.

The firm has suffered setbacks in recent years in line with the volatility in the consumer sector. In June portfolio company AllSaints, a clothing retailer, said it was entering into company voluntary arrangement with its creditors, allowing it to restructure while paying back a proportion of its debt over time.

Glendower, Lazard and ICG declined to comment.