Thomas Lee Partners to sell Michael Foods to GS Capital for $1.7 billion

Private equity firm Thomas H Lee Partners (THL) is selling Michael Foods, a leading US food processor and distributor to GS Capital Partners, an affiliate of Goldman Sachs Group for $1.7 billion.

Minnetonka, Minnesota-based Michael Foods produces and distributes egg, cheese, dairy case, and potato products to food service distributors, restaurant chains, food ingredient companies, and the retail grocery market in North America, the Far East, South America, and Europe.

For 2009, Michael Foods reported sales of $1.5 billion.

Boston, Massachusetts-based THL, which was part of the consortium in last week's collapsed deal to acquire Fidelity National Information Services for $15 billion, had acquired a significant stake in Michael Foods in 2003 for $1.05 billion from the Vestar Capital Partners and Goldner Hawn Johnson & Morrison, which in turn had acquired Michael Foods for $600 million in 2001.

THL will retain a 20-per cent stake in Michael Foods and is likely to make a return of more than three times its original investment, according to analysts.

''We're pleased with the growth and performance milestones we have achieved over the past several years and appreciate the world-class strategic and operational support we have received from THL during that time,'' James Dwyer, Jr., Michael Food's chief executive, said in a statement. ''Looking ahead, we're enthusiastic about our new partnership with GS Capital Partners.''

Founded in 1974, THL is one of the oldest private equity firms in the US. Since inception, THL has raised approximately $22 billion in equity capital, invested in more than 100 businesses with an aggregate purchase price of more than $125 billion.