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Iceland Foods CEO Buys Frozen Food Chain for $2.3 Billion

Iceland Foods Ltd. Chief Executive Officer Malcolm Walker teamed up with investors including DFS Furniture founder Graham Kirkham to acquire the budget U.K. supermarket chain from its Icelandic owners for 1.45 billion pounds ($2.3 billion) after fending off rival bids.

The CEO, who started the chain in 1970, and the investors will buy the 77 percent stake held by Landsbanki Islands hf and Glitnir Bank hf, according to a statement today. Walker and senior managers will own 43 percent of the equity, and will take operational and board control. Kirkham, South African private-equity firm Brait SE and Dubai-based retailer Landmark Group Ltd. will hold the remaining 57 percent.

Landsbanki and Glitnir have been seeking a buyer for their stake in the Deeside, Wales-based retailer since last year, having gained control in 2009 after the collapse of Baugur Group hf. Bain Capital LLC and BC Partners Ltd. had also submitted offers for Iceland, a person familiar with the matter said last month. Walker had the right to match the highest bid.

“I am utterly delighted that we have been able to conclude a deal,” Walker said in the statement. Iceland has been “one of the U.K.’s best performing food-retailers” since the current senior management team returned in 2005, he said.

Credit Suisse Group AG, Deutsche Bank AG, HSBC Holdings Plc, Nomura and Royal Bank of Scotland Group Plc provided 860 million pounds in a so-called all-senior debt package. Walker, who will become Iceland chairman as part of the deal, is also receiving a 250 million-pound vendor loan note.

Enterprise Value

Former managing director Andy Pritchard will retire and won’t participate in the buyout.

The transaction values all of Iceland Foods’ equity at 1.55 billion pounds, and gives the company an enterprise value, or the sum of its equity and net debt, of 1.45 billion pounds.

Iceland’s sales growth was faster than that of the U.K. grocery market in the last three months, according to Kantar Worldpanel data. The owner of more than 700 stores has a 2.1 percent share of U.K. supermarket spending.

Iceland increased sales by 5.9 percent to 2.4 billion pounds in the financial year ended March 25, while pretax profit rose 15 percent to 155.5 million pounds.

Walker’s team was advised by Rothschild. Deutsche Bank, HSBC and Nomura also provided financial advisory services in connection with the transaction. Bank of America Merrill Lynch and UBS AG managed the sale of Iceland.

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