May 8, 2015 / 10:16 AM / 4 years ago

UPDATE 2-Metro, China's Bright Food eye private equity owned Classic Fine Foods

* Auction has drawn private equity bidders

* Classic Fine projected to have about $25 mln core earnings (Adds Bright Food Group comment, and Baring no comment)

By Denny Thomas and Arno Schuetze

HONG KONG/FRANKFURT, May 8 (Reuters) - German retail group Metro and China’ state-owned Bright Food Group Co are among the suitors in talks to buy private equity-owned Classic Fine Foods in a deal potentially worth $300-$400 million, including debt.

Metro has placed a preliminary bid for the business, people familiar with the matter said. Bright Food’s Australian unit Manassen Foods is in talks to buy the Singapore-based company, though no decision has been made on whether to bid, Bright’s spokesman told Reuters.

Metro is aiming to expand its Asian operations with plans to buy Classic Fine Foods which supplies upmarket hotels and restaurants with high-quality dairy, meat, pastry, seafood, pasta and dry products, the sources said.

Bright Food, which had sales of about $19.3 billion last year, has been on a global acquisition spree over the last few years, buying British cereal maker Weetabix and Australian dairy company Mundella Foods among others.

The auction has also attracted interest from Switzerland’s DKSH and several private equity firms including Bain Capital and Baring Private Equity, the sources said.

They said it was unclear how many of these potential suitors had actually placed preliminary bids.

Buyout fund EQT bought Classic Fine Foods in 2011, hoping to benefit from expected strong growth in the Asian high-end foods market, following economic growth in the region and an increased consumer taste for Western cuisine.

The Swedish investor has hired boutique firm Rippledot Capital Advisers to manage the sale, the sources said.

Classic Fine Foods is projected to have core earnings of about $25 million in 2015, one of the people said.

A deal value of up to 16 times forward earnings would be clearly above the average multiple of 8 that food retailers such as Marks & Spencer, Carrefour, Tesco or Kroger trade at.

But the bidders are ready to pay a premium to get a hold of a distribution network that could help them ride Asia’s boom in consumer goods and branded foods business, the sources said.

The buyer would get control of a niche business that imports, stores and distributes foodstuffs, and has about 700 staff.

Metro, EQT, DKSH, Bain and Baring declined to comment. Sources declined to be identified as the discussions are confidential.

Metro has said it expects to become more active in acquisitions in future, starting small but potentially building up to “sizeable” deals. (Additional reporting by Matthias Inverardi in Duesseldorf, Anshuman Daga and Saeed Azhar in Singapore, Rupert Pretterklieber in Zurich, David Lin and Kazunori Takada in Shanghai; Editing by Himani Sarkar)

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