Private equity giant Pacific Equity Partners halts selling spree to take 50% stake in personal hygiene firm

Pacific Equity Partners has halted its selling spree to take a 50% stake in an Australasian personal hygiene and tissue products joint venture, as the Australasian private equity firms cops criticism for the performance of Collins Foods, whose shares have sunk since listing in August.

PEP, which has about $6 billion in funds under management, says its joint venture with Swedish hygiene and paper company Svenska Cellulosa Aktiebolaget (SCA) to develop SCA’s Australasian operations will provide a strong foundation for growth. SCA’s brands include TENA, Sorbent and Purex and it has two manufacturing plants in Australia, two in New Zealand and one in Fuji, as well as distribution centres across the three countries.

“We are delighted to partner with SCA in investing in this market leading company. The combination of SCA’s global expertise, along with PEP’s track record of investing to support the growth of Australasian businesses will assist in providing a strong foundation for SCAHA’s next phase of growth,” PEP managing director Rickard Gardell said in a statement.

SCA president and chief executive Jan Johansson says the investment would strengthen its operations in Australia and New Zealand, and would secure access to local competence and the local capital market.

But PEP, which is believed to have spent $250 million on the JV, is copping heat for the performance of Collins Food, which it listed three months ago in the largest IPO of 2011.

Collins Foods, which has KFC and Sizzler restaurants, listed at $2.50 per share in August but shares are now trading at $1.20, following a recent profit downgrade.

Collins recently offloaded its Independent Liquor stake to Japan’s Asahi, and Tegel Foods to Affinity Equity Partners for $605 million. It started the year with the acquisition of Energy Developments for $844 million.

It is also looking to flog its New Zealand biscuit business Griffin’s Food.

The investment comes as a report compiled by the Australian Private Equity and Venture Capital Association showed investments by private equity and venture capital funds increased by 44% year-on-year to $3.64 billion – but much of this was due to funds raised before the GFC.

The annual report on PE and VC firms showed that investment reached $3.6 billion in the 2011 financial year, a three-year high, although the number of companies receiving investments fell to 150 from 183 the previous year.

The report also found that the top 10 deal accounted for almost three quarters of total investments through the year.

Dr Katherine Woodthorpe, chief executive of AVCAL, described the data as “encouraging.”