FRENCH private equity firm PAI Partners will buy R&R Ice Cream from rival company Oaktree Capital. PAI will pay about €850m for R&R, the UK company that makes Nestlé ice cream, Ribena lollies and Lyons Maid.
The deal will be financed by a €253m five-year "payment-in-kind" (PIK) note, according to one of the banks managing the deal. A PIK is a form of debt that allows borrowers to pay interest in more debt instead of cash, though they must repay in full when the bonds fall due.
PIKs were widely blamed for contributing to the collapse of UK fashion chain Peacocks last year, but have seen a comeback in Europe this year as buyout firms capitalise on investor demand for higher risk debt.
For PAI the deal is one of several recent forays into the consumer sector. Previous transactions include French yoghurt maker Yoplait in 2002 and Britain's United Biscuits in 2001. (Reuters)