Private equity newbies beat Terra Firma to Tesco asset

Two new private equity firms backed by rich families have fought off competition from larger private equity rivals to acquire Dobbies Garden Centres from supermarket chain Tesco for £217 million.


Dobbies Garden Centres is the second-largest specialist garden centre group in the UK

Midlothian Capital Partners and Hattington Capital, which both operate on a deal-by-deal basis, fought off competition from private equity firm Terra Firma Capital Partners to acquire the company, according to a person familiar with the matter.

Midlothian and Hattington received backing for the deal from several wealthy retail-focused private investors, mainly based in the UK, according to a spokesman for the firm. The deal was also backed by loans from private debt provider Ares Capital Partners.

Dobbies Garden Centres, based near Edinburgh, is the second-largest specialist garden centre group in the UK, with 35 centres in Scotland, England and Northern Ireland.

Terra Firma tabled a bid for the company through its portfolio company Wyevale Garden Centres but was beaten by a higher bid from Midlothian and Hattington, according to a person familiar with the matter.

Both Hattington and Midlothian are relative newcomers to the UK mid-market private equity scene.

London-based Hattington was set up in 2014 and its team members include former KKR partner Frederick Goltz and former Tesco commercial director Barney Burgess. The firm made an investment in food and juice bar chain Crussh in March 2015, according to its website.

Midlothian was set up in 2015 by the former chief financial officer of online supermarket chain Ocado Group, Andrew Bracey, alongside former UBS executives Aidan Clegg and Neil Currie.

The deal comes as family offices and rich individuals become an increasingly important part of the private equity landscape, both in terms of acquiring assets and providing cash for buyout firms to do deals. Family offices made up 9% of all money committed to private equity in 2016, compared with 4% in 2011, according to Preqin.

Bregal Freshstream closed its first fund at €600 million in 2015 with the backing of just one investor – an investment arm backed by the Brenninkmeijer family, which owns the C&A chain. Meanwhile, Brait Private Equity, backed by South African tycoon Christo Wiese, acquired high street fashion retailer New Look from private equity firms Permira and Apax Partners in May 2015.

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