Private equity company Anacacia Capital is hoping to repeat its successful exit of a baby-food manufacturer last year with its latest investment in Australian dip manufacturer Yumi's Quality Foods.
Jeremy Samuel, Anacacia Capital's managing director, said the company first contacted Yumi in 2011 and had kept a close eye on the sector since then but stepped it up to exclusive due diligence in May last year.
He said the market was tough in Australia because there were some strong players in the market, but through its research Anacacia determined that Yumi was the standout in terms of potential.
"Australia has a strong competitive advantage in branded healthy food. Backing a small private company, you have to ensure you're backing the absolute best people, and in segments you think are growing where you have a strong, competitive advantage," Mr Samuel said.
Anacacia had a successful 2013, selling its baby-food manufacturer Rafferty's Garden to soap-maker Cussons in a deal worth more than $70 million.
Other exits have included Home Appliances, sold to McPherson's for about $22m.
Mr Samuel said Yumi was a great example of an Australian company that, despite the challenges of being a branded-food business in Australia, had shown that it could be done successfully.
"It's a family-run business, founded by two brothers. The other parties who deal with them have high regard for them," Mr Samuel said.
The companies did not disclose the financial arrangements between the parties but Anacacia generally invests $10m to $25m and most of the businesses it targets have revenues between $20m and $150m.
Yumi holds a strong position in the dip manufacturing market in Australia. Scan data shows at Coles Yumi is the standout leader in terms of fastest selling units per store each week.
It produces six of the top 20 dip products sold at Coles and has significant representation in Woolworths.
The company has been growing more than 20 per cent each year and has a strong presence in cafes, restaurants and corner delis. Dips are Yumi's main product but it also sells falafel, fish balls and other health snacks, and all its products are gluten-free and dairy-free.
Mr Samuel and Anacacia director Ern Pope will join Yumi's board. Yumi managing director Michael Friedman said the investment was an important milestone in his company's development.
Anacacia closed its most recent fund oversubscribed, and Mr Samuel said that it had the capital for new investments this year.
He said the private equity company was hoping to uncover further solid investments and looking in sectors beyond food. That could include distribution companies, retailers and other manufacturers.
"Businesses typically with revenues of more than $20m and profits of between $4m (and) $20m, and often a business dealing with succession issues," he said of the companies it investigates. "We're seeing a lot of family companies that are looking for Anacacia to join the register and help strengthen them.
"Longer term they want help with succession planning and for us to build out the strength of the board and management team."
Mr Samuel said the company also looked to help companies it invested in to add bolt-on acquisitions to their portfolio.
© The Australian 3 January 2014