Power Sustainable acquires B.C.-based Fine Choice Foods

Food- and agriculture-focused private-equity investor Power Sustainable Lios has acquired Richmond, B.C.-based Fine Choice Foods Ltd. from a U.S. fund as part of a push to put capital into Canadian companies that have North American reach.

The deal announced Thursday makes Power Sustainable Lios the majority owner of Fine Choice, which manufactures the SUMM! brand of Asian-inspired, refrigerated appetizers such as spring rolls, gyoza dumplings and bao buns. The transaction returns the company to Canadian hands after eight years of U.S. ownership.

Farm Credit Canada and Toronto-based Bonnefield Financial Inc., through its agribusiness fund, are buying minority stakes in Fine Choice, which will keep its existing management team in place. The seller was San Francisco-based private-equity firm Swander Pace Capital, which owned the company since 2018.

Financial terms were not disclosed. But Power Sustainable Lios typically invests in businesses with $150-million to $250-million in annual sales and earnings before interest, taxes and depreciation and amortization (EBITDA) of $15-million to $25-million.

The deal is a first step in a plan that Montreal-based Power Sustainable announced in September to channel at least $10-billion into Canadian companies and infrastructure over the next five years.

Power Sustainable plans $10-billion investment push in Canadian infrastructure and companies over five years

Power Sustainable is an asset-management arm of financial-services conglomerate Power Corp. of Canada POW-T, which is led by the Desmarais family. The Lios subsidiary is Power Sustainable’s agri-food investing platform.

The acquisition of Fine Choice is the second deal in a row that Power Sustainable Lios has made where the seller was a U.S. private-equity firm. In January, Power Sustainable Lios bought Ontario-based Crofter’s Organic, which is North America’s largest supplier of organic jams, jellies and spreads.

“We’ve been able to bring ownership back to Canada, and that’s not the mandate, but it’s a moment of pride,” managing partner Jonathan Belair said in an interview.

Fine Choice Foods is the fifth deal made through Power Sustainable Lios’s $285-million first fund, which also owns Food Cycle Science Corp., or FCS, a maker of kitchen appliances for recycling food waste.

The SUMM! brand traces its roots to a small, family-run storefront in Vancouver that sold frozen dim sum. The company expanded to become a manufacturer of refrigerated – but not frozen – appetizers sold in national grocery chains in Canada and the U.S., as well as club stores such as Costco.

Swander Pace led Fine Choice through an eight-year program to professionalize the business. Now, Power Sustainable Lios plans to expand its range of products and push into new markets in the United States.

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Fine Choice operates in a segment of the food market that is growing in popularity but also hard to replicate, Power Sustainable Lios partner Craig Hanna said.

Ready-made, refrigerated foods are “perceived as fresher, healthier, more convenient,” he said, because they haven’t been frozen and are faster to cook. At the same time, an increasing number of customers in North America are showing an interest in trying new flavours and ethnic foods, he said.

Even as shoppers feel the pinch of higher prices driven by inflation, demand for those foods has held up well. “Consumers are pressed for dollars, but they’re also pressed for time,” he said.

Fine Choice stood out in part because it has an established supply chain, Vancouver-area manufacturing facilities and strong food-safety protocols that allow the company to widely distribute refrigerated, packaged food, he added.

At a tough moment for private equity, with high interest rates and economic uncertainty contributing to a glut of deals, food producers are becoming attractive takeover targets. Canada’s food and beverage manufacturing industry contributes about $35-billion to the country’s gross domestic product, which is more than twice the size of the auto sector.

The sector has a large number of family-owned businesses reaching a stage where they need capital and professional management to continue to expand.

“I’m not sure if everybody realizes how rich the opportunity set is in Canada,” Mr. Hanna said.

Last year, the private-equity arm of Fengate Asset Management acquired Toronto-based healthy-snack maker Sweets From the Earth, taking control of a family-led business but also keeping its founders involved.