NEW YORK, AUG. 10 -- TLC Group L.P., a Wall Street investment firm, said today that it has agreed to pay $985 million for BCI Holdings Corp.'s Beatrice International Food Co. unit.
The deal will make TLC Group, which made its mark earlier with a highly profitable buyout of McCall's Pattern Co., the nation's biggest black-owned business in terms of annual revenue.
BCI, a company formed by the New York investment firm Kohlberg Kravis Roberts & Co. to execute its $6 billion leveraged acquisition of Beatrice last year, said it would use the proceeds of the sale to reduce debts associated with the buyout. Beatrice Food's U.S. core business will remain under Kohlberg Kravis Roberts ownership.
Combining profits of the sale to TLC Group with a previous sale of BCI Arrowhead Drinking Water Co., BCI executives said they so far have recouped more than $4.8 billion from resales of Beatrice units since the acquisition.
Beatrice International Food, with annual sales of $2.5 billion, operates 64 companies in 31 countries throughout Europe, Canada, Latin America, Asia and Australia. Its products include dairy products, ice cream, confectioneries, snacks, processed meats and beverages.
The Beatrice unit's $2.5 billion in sales would push TLC past such well-known black-owned businesses as Johnson Publishing Co., publisher of Ebony and Jet magazines, and Motown Industries, the entertainment concern, according to rankings compiled by Black Enterprise magazine.
The acquisition also would continue TLC's rapid rise in the risky -- and often highly profitable -- field of leveraged buyouts. Such acquisitions are financed heavily with debt that is repaid with the target company's cash flow or the sale of its assets.
TLC is run by Reginald F. Lewis, 44, who founded the investment firm after working as a corporate attorney at the New York law firm of Paul, Weiss, Rifkind, Wharton & Garrison and later at the firm he cofounded, Lewis & Clarkson.
The Beatrice deal is just the second major buyout by TLC, which is controlled by Lewis and his family.
After its founding in 1983, TLC acquired and later sold interests in several relatively small broadcasting properties before undertaking a leveraged buyout of McCall Pattern in 1984.
TLC and senior members of McCall management acquired the sewing pattern company from Esmark Inc. for $1 million in cash and $23.5 million in debt. During the two years TLC owned the company, Lewis became actively involved in its management. He recognized that although home sewing had been declining as more women entered the work force, McCall had inherent economic strengths and strong management that could be translated into higher profits, said Everett Grant, vice president of TLC. McCall's operating earnings rose to $14 million in 1986 from a previous peak of $6.5 million, and its earnings per share nearly tripled from 1984 to 1986.
In July, TLC and the others sold most of their holdings to an investor group led by the British textile concern John Crowther Group, netting $90 million.
"The entire transaction was a textbook leveraged buyout in terms of having done everything well," said Dean C. Kehler, a managing director of Drexel Burnham Lambert Inc., the investment bank that is financing TLC's buyout of Beatrice International.
Grant said the buyout of Beatrice International, while much bigger than the McCall deal, reflected TLC's strategy of finding companies that are leaders in their respective businesses and already have top-quality management in place.
Grant said TLC also seeks companies in which it can play an active management role, studying its operations to determine changes needed to bring out the greatest value of its businesses. In this respect, Grant and others said Lewis had been a key element in TLC's ability to succeed with McCall Pattern and to bring off the Beatrice International deal.
"Some investors might be more investors or deal guys, but I'd characterize him as an active investor," Grant said of Lewis. "He's somebody who really likes to get involved in situations, get his hands dirty."