Souped-up KKR may win Continental

Private equity firm Pacific Equity Partners is believed to be sidestepping the sales process for Unilever’s Continental Soup business in a move that may place Kohlberg Kravis Roberts as the clear frontrunner.

But a major hurdle for KKR is expected to be clearance from the Australian Competition & Consumer Commission following its recent $3.15bn purchase of the Arnott’s Biscuits business that also has an Australian soups division.

Continental Soup, which is up for sale through investment bank UBS, generates close to $23m in reported earnings before interest, tax, depreciation and amortisation and $214m in annual revenue. While the company has good technology that would likely be attractive to suitors, the operation itself is seen as a mature business.

Jewel Foods was understood to have made efforts to acquire the business some time ago but was blocked by the competition watchdog.

Continental Soup may not be on every buyer’s radar, but private equity firms such as PEP have recently been circling various other targets.

The Australia-based buyout fund circled Next Capital’s out-of-home entertainment business Funlab, but is understood to have walked away from the Citi and JPMorgan-advised company because the price it was willing to pay was below the vendor’s expectations.

While Funlab has also been earmarked for an initial public offering, it is expected that if a listing does occur it is now more likely to be next year.

Meanwhile, eager buyers of Suncorp’s Capital Smart business are expected to find out early on Thursday if they have been successful in an acquisition.

Final bids were due on Monday. So far, the listed AMA is viewed as the frontrunner, with the Allier Capital-advised Quadrant Private Equity shaping as a strong challenger, given that the business founder Jim Vais remains in its corner. Yet it is still not worth ruling out strategics such as Britain’s Belron.

Luminis Partners has been working on the sale. The business is expected to sell for about $300m.