Private equity giant Kohlberg Kravis Roberts is understood to be in advanced talks with Freedom Foods about an acquisition of its cereals and snacks division.
It is believed that the New York-based global investment company, with its $US221.8bn of assets under management, is eager to buy the business that will add to its acquisition of the iconic Tim Tams and Shapes maker Arnott’s Biscuits.
KKR purchased Arnott’s in 2019 for $US2.2bn from Campbell Soup Company.
Arnott’s chief executive George Zoghbi had earlier signalled that the biscuit maker was eager to embark on acquisitions.
Freedom Foods was placed in a trading halt in June after its share price fell more than 20 per cent, with news of the shock departure of its managing director Rory Macleod and earlier chief financial officer Campbell Nicholas.
It later said that it would remain in voluntary suspension to investigate its financial position, revealing further writedowns and the need for additional provisioning for out of date stock.
Freedom and its auditor Deloitte now face a class action.
On Wednesday, Freedom said it was assessing options for its cereal and snacks division after a potential sale of the muesli bar business was flagged by DataRoom in October.
Sources earlier said Freedom Foods had approached potential buyers, which would likely include groups such as Uncle Toby’s, Arnott’s Biscuits, Carman’s and Sanitarium.
Freedom added on Wednesday that it was would embark on a $280m capital raising - likely to be in January - and would announce recapitalisation plans by mid December.
DataRoom understands that special situations fund Oaktree Capital Management is involved in the recapitalisation plan.
Working for Freedom Foods is advisory firm Moelis, law firm Ashurst and PwC.
Shreas remain suspended.
Freedom’s cereals and snacks division operates out of its Leeton, NSW and Dandenong, Victoria factories.
The Leeton factory specialises in manufacturing allergen-free cereals and snacking products, producing box packaging formats from 144g to 1kg as well as single serve bars.
The Dandenong factory produces all types of oat-based and gluten free clusters, mueslis and bars in different sizes and weights.
Freedom also produces its UHT dairy products in a factory in Shepparton and it also has an operation based in Ingleburn, where its plant-based products are produced.
Citi analysts said in a research note that Freedom Foods had net plant and equipment worth $589m.
Previously, it has been said that a recapitalisation of Freedom Foods could include various solutions, which may involve the sale of a division, funding provided by a special situations fund and even a sale and leaseback of some facilities to a real estate group such as Charter Hall.
The dairy and cereal producer is in need of about $200m and the company has reached a standstill agreement with its lenders.
Freedom Foods has recently revealed that the series of accounting discrepancies has cost the company more than $500m in writedowns.
The company’s 54 per cent shareholder is billionaire Tony Perich.
The Australian Securities & Investments Commission is investigating the company, which has said much of the writedowns relate to capitalisation costs not being treated as expenses, new products being sold below cost and accounting treatments being “based on unrealistic assumptions”.
Freedom recorded a net loss of $174.5m in the year to June 30.
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