Patties buys Boscastle as owners eye pie floater

Mathew Dunckley
19 June, 2018
The Age 

Food giant Patties has bought Boscastle gourmet pies to complement its Four’n’Twenty powerhouse brand as the company’s private equity owners eye an exit in as soon as the next year.

Patties was bought by Pacific Equity Partners for $230 million in 2016 and delisted from the ASX and holds about 50 per cent market share for pies sold in the nation’s supermarkets through its existing brands which include Herbert Adams and Nannas.

“What is happening in the market is consumers were telling us there was a demand for a premium, high quality, hand-crafted pie,” said Patties chief executive Paul Hitchcock.

“Consumers kept telling us they would pay more for a high quality product.”

Mr Hitchcock said it would “have been a bit of a stretch” to try to take the Four’n’Twenty brand into that space so the company had looked for an acquisition before settling on Boscastle.

Boscastle was started by Terry Cremean who built the business over three decades. Mr Cremean was unavailable to be interviewed and Mr Hitchcock declined to comment when asked how much Patties spent to buy his business.

“We paid a very good multiple,” Mr Hitchcock said.

“We are looking to double or quadruple the sales in the next two years.”

Mr Hitchcock said Boscastle was strongest in its home state of Victoria which accounted for 80 per cent of its sales but Patties would immediately look to build its profile interstate.

“We want to take the product national leveraging the Patties sales force,” he said, adding the company sold roughly 50 per cent of its pies in supermarkets.

Asked when PEP might look to exit its Patties ownership, Mr Hitchcock said it was likely seen as a three to five year turnaround and pointed out that PEP had invested a signficant amount of money in the business in the past 12 months. 

“Definitely an IPO is an option but I’m sure a trade sale is an option as well, when the time is right we will start looking at what those options are,” he said. 

Patties most recent accounts were lodged in November for the year to June 30 2017 which included a period under the previous management before the takeover was finalised in late 2016. They showed revenue fell 12.3 per cent to $214 million while the company slid to a $4.5 million loss after tax after posting a similar sized profit the previous year.

It noted that its performance was affected by changes to the business, associated transaction costs and other one offs. 

That performance came after Patties’ new owners conducted a review of the company’s assets that concluded there were a number of assets it could not substantiate or which should have been written down (including unsaleable inventory) worth $8.8 million. It deducted that amount from the previous year’s profit.

The company received a $100 million loan from its owner which saw its total liabilities lift by $40 million to $164 million.