By Elizabeth Rigby and Martin Arnold
Published: May 19 2010 22:15 | Last updated: May 19 2010 22:15
Food is back on the menu for private equity groups, which are searching for defensive assets as they bid for Unilever’s Italian food business, Spain’s Panrico doughnut bakeries, and the maker of John West canned tuna in France.

PAI, BC Partners, Doughty Hanson and Charterhouse are likely to join Permira and Lion Capital, which own Birds Eye Iglo and Findus Group respectively, when initial bids are tabled for Unilever’s Findus Italy on May 25. The business has an enterprise value of about €700m (£600m), according to several people close to the process.

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One industry source said Nestlé would be an obvious strategic buyer of Findus Italy because it has a frozen food business in Italy with a 15 per cent market share.

Europe’s food sector is attractive to private equity as it has held up relatively well in the downturn. Permira is in talks to buy Panrico, which Apax Partners bought for €900m five years ago but which has been hit by the recession in Spain.

BC Partners, Blackstone and Permira are bidding for MW Brands – owner of John West and Petit Navire tuna – for which Trilantic Capital, the former buy-out arm of Lehman Brothers, wants €600m.

Unilever’s Findus Italy emerged as a disposal candidate in December. The Italian arm was the only part of Unilever’s European frozen food operations that it retained when it sold Birds Eye and Iglo to the UK’s Permira for €1.7bn in 2006.

One bidder said: “It is a defensive industry. The business needs turning around; it has been declining for two to three years. . .it is a massively iconic business in Italy so I think [the auction] will be very competitive.”

Goldman Sachs – leading the auction – has attached staple financing to the information memorandum, offering financing to drum up interest.

Findus Group, which Lion Capital bought in 2008 for £1.1bn, is considered one of the favourites to buy Findus Italy. Another leading contender is Birds Eye Iglo. Findus Italy is likely to be valued at between eight and 10 times its €65m-€75m of annual earnings before interest, tax, depreciation and amortisation.

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