A British investment fund manager sees the potential for a baking empire in the ovens of Pico Rivera-based ingredient and distribution company BakeMark USA.
Pamplona Capital Management of London acquired BakeMark for an undisclosed amount from Sandy Springs, Ga., conglomerate CSM Bakery Solutions in a deal that closed last month.
Pamplona plans to use BakeMark’s three manufacturing facilities and 25 distribution centers across the United States and Canada as a jumping-off point to consolidate a highly fragmented industry in order to gain scale within existing markets, broaden product offerings and enter new channels, according to its website.
BakeMark will serve as the base of strategy. The company has about 1,000 employees, and sells ingredients and baked goods under a variety of brand names, including Duncan Hines and Westco.
“BakeMark is a market-leading specialty distribution platform serving as the premier bakery ingredient supplier in North America,” William Pruellage, a Pamplona partner, said in a statement on the transaction. “We believe BakeMark is well-positioned to succeed as a standalone entity and capitalize on new growth opportunities.”
Market share concentration among the 5,640 U.S. bread and bakery goods wholesalers is low and expected to increase in the coming years, according to market researcher IbisWorld. The wholesale industry generated $60.9 billion last year, said IbisWorld, which projects revenue to grow 1 percent through 2021.
“The industry is kind of slated for growth in the next five to 10 years,” said Bernadette Shanahan-Haas, director of operations at trade organization Retail Bakers of America. “I think a lot of investment funds and bigger companies like BakeMark. I always think it’s a good sign that they see some value.”
Pamplona, which manages $12 billion of investments across a range of industries, bought a majority stake in BakeMark through a leveraged buyout, according to a report from S&P Global Market Intelligence.
Trade publication PE Hub, citing unnamed sources, said BakeMark changed hands for more than $500 million.
The Business Journal couldn’t independently confirm that number. Representatives for BakeMark, Pamplona and CSM Bakery Solutions declined to comment.
Among BakeMark’s brands is Trigal Dorado, which CSM acquired in 1999 and through which it sells Latino products such as churros and guava fillings. BakeMark also publishes a bilingual trade publication titled BakeMark’s Panaderia.
Although BakeMark doesn’t specialize solely in Latino foods, Robert Alaniz, a board member of the Latino Food Industry Association in Santa Ana, said he saw the sale as a sign that investors are recognizing the growing market of that cuisine.
He pointed to two private equity firms’ investment late last year in two Latino supermarket chains in California, Mi Pueblo Food Centers and Cardenas Markets, which merged last month.
“People are recognizing the market and looking how to tap in,” Alaniz said. “It’s very much a growing industry.”
U.S. sales of Latino food and beverages grew 4 percent to almost $18 billion in 2015 from the prior year, according to Rockville, Md., market research firm Packaged Facts.
BakeMark’s trademark was registered in 1998, but its history goes back almost a century.
According to its website, CSM Bakery Solutions began as Netherlands-based sugar-processing company CSM in 1919. The company stepped into the world of baked good ingredients in 1992, when it acquired L.A.-based Westco.
Founded in 1928, Westco grew to prominence selling doughnut mixes. After the acquisition, CSM picked up other baking ingredient businesses.
In 2013, CSM sold the baking-related part of its business, which made up the vast majority of the company’s sales, and the CSM brand name to New York-based private equity firm Rhone Group, according to a CSM press release. The new company took on the name CSM Bakery Solutions.
Although CSM Bakery Solutions generated $2.9 billion in sales last year, the company has struggled with debt and a botched rollout of new software systems in its North American operations, according to Moody’s Investors Service, which downgraded the company’s credit in November.
CSM announced in April its plan to sell BakeMark.
“Since its formation in 1998, BakeMark has operated as a free-standing distribution company and, in that time, built a strong and successful heritage,” CSM Chief Executive Marianne Kirkegaard said in a statement. “This divestiture will allow … BakeMark, under new ownership, to further strengthen their already strong capabilities and reputation as the industry’s supply and distribution market leader in North America.”