PAI Funds Nestle Ice Cream JV With €3.6 Billion of New Equity

(Bloomberg) — European private equity firm PAI Partners has amassed €3.6 billion ($4.2 billion) in new equity for its ice cream venture with Nestle SA, to help it hold onto the asset even longer.

In one leg of the multipart deal, the Abu Dhabi Investment Authority will become a minority co-investor in Froneri, alongside PAI, according to the statement on Thursday that confirmed an earlier Bloomberg News report. ADIA and PAI are jointly investing €1.4 billion directly in the business, whose brands include Häagen-Dazs in the US, people familiar with the matter have said.

PAI, which owns roughly 50% of Froneri, is also creating a new continuation fund to hold its stake so that it can keep one of its longest-held investments for even longer, the statement showed. Goldman Sachs Asset Management is the lead investor in the new vehicle. The fund has raised €1.75 billion, people familiar with the matter have said. The entire deal values the Froneri business at €15 billion including debt, the people said.

“Froneri has delivered highly attractive returns for our investors, which we believe will continue into the future,” Richard Howell, a managing partner at PAI Said in an interview. “Continuation vehicles by definition have a shorter hold period of five years, so the continued M&A-led transformation we see here would not have been possible within the original CV.”

Buyout firms are increasingly turning to innovative structures to hold onto their best-performing assets beyond the usual tenure, tapping their own investors to fund expansion of marquee holdings.

The new continuation fund for Froneri is rare as it’s the second such vehicle on the same asset in a so-called CV-squared deal since the private equity firm first invested more than a decade ago.

PAI bought UK-based R&R Ice Cream in 2013 from an investor group backed by Oaktree Capital Management. In 2016, it combined that business with part of Nestle’s ice cream empire to create Froneri.

The investment firm moved its Froneri holding from its PAI Europe V fund into the first continuation vehicle in 2019. That fund raised about €2 billion and also counted GSAM and Carlyle Group Inc.’s AlpInvest as investors, the people said. The previous continuation fund also held Italian eyewear manufacturer Marcolin SpA, which PAI sold to VSP Vision earlier this year.

(Updates throughout with confirmation and adds PAI comment in fourth paragraph.)

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