Advent International has agreed to buy Italian dessert ingredients maker Irca from rival Carlyle Group, in a sign of buoyant private equity dealmaking despite market disruption caused by the war in Ukraine.
Financial terms were not disclosed, but people close to the transaction said it valued Irca at around €1 billion ($1.1 billion).
That is roughly twice what Carlyle paid in 2017, when it bought an 80% stake in Irca from the Nobili family and investment firm Ardian, later raising its ownership to 97%.
At the time, Irca had a limited presence abroad. "Carlyle has put Irca onto an international expansion path, focusing in particular on the US market," said Filippo Penatti, managing director of the Carlyle Europe Partners advisory team.
With more than 1,000 employees and customers in around 100 countries, Irca is aiming for revenues to top €400 million this year. The company, based north-west of Milan, dates back to 1919 when the Nobilis started producing essences for liqueurs.
Irca's growth accelerated in 2018 when it bought Dutch rival Dobla, followed by a second smaller acquisition last year. It is now adding capacity by investing in two large Dobla plants in the United States and Vietnam, while a new plant in Italy is expected to start operating in May.
Irca competes with Swiss chocolate manufacturer Barry Callebaut, whose shares trades at around 15 times core profits and are up 4.5% over the past three months, according to Refinitiv data, despite the Ukraine conflict.
"The sector in which Irca operates is very fragmented globally, there is room to grow through meaningful acquisitions and that is the core of Advent's value creation strategy for the group," Advent managing director Francesco Casiraghi told Reuters.
Italy accounts for roughly half of Irca's revenues, with the rest coming mainly from France and Spain and only around $50 million from the United States.
The war is adding to energy and raw material price pressures, but Penatti said Irca had historically proved able to withstand higher costs.
Business-to-business players like Irca, which supplies cake ingredients and decorations to chefs in restaurants and hotels, generally have more pricing power than companies targeting end-consumers.
Private equity firms completed 654 deals in Italy last year for an overall value of €14.7 billion, up 123% from 2020, KPMG data showed on Monday.