Sun Capital Buys Meatpacker, Betting on Japanese Markets
March 3, 2005

Turnaround firm Sun Capital Partners is betting that Japan will soon open its doors to U.S. beef after banning it in late 2003 over fears of mad cow disease.

The firm, based in Boca Raton, Fla., closed a deal earlier this week to acquire a majority stake in Creekstone Farms Premium Beef, a small processor of high-end Black Angus beef. The company, based in Arkansas City, Kan., attracted media attention last year when it unsuccessfully tried to win approval from the U.S. Agriculture Department to test all of its cattle for mad cow disease. Had regulators allowed the testing, Creekstone would have had access to the $1.7 billion exported beef market in Japan.

Financial terms of the acquisition were not disclosed. Sun Capital is looking to refinance the debt that it assumed as part of the deal.
Creekstone's customers include beef distributors that sell premium beef to restaurants.

Sun Capital likely acquired the troubled meatpacking company at a discount. In 2003, a large commercial bank also bet on a turnaround in the beef market when it purchased Creekstone out of bankrputcy. News reports at the time, citing bankruptcy court filings, said Creekstone's 400,000 square-foot processing plant was valued at about $100 million.

In December of last year, Creekstone was forced to lay off almost 150 employees after the Dept. of Agriculture denied its request to test all of its beef.

Besides trying to gain access to the Japanese market, Sun Capital said it would cut the company's costs and use new equity capital to fund sales and marketing initiatives that emphasize Creekstone's belief that it sells all-natural, high quality beef, according to Steven Liff, a managing director in Sun Capital's Los Angeles office.

John Stewart, Creekstone's chief executive and founder, will retain a minority interest and continue to lead the company.
Creekstone becomes a portfolio company in Sun Capital's third buyout fund, a $500 million limited partnership that is more than half invested.

Sun Capital found the deal through Los Angeles investment bank Trinity Capital. Kirkland & Ellis advised the firm on the transaction.