3i sells EAT to Penta

Penta Capital has made its first entry into the UK sandwich chain market with a £39m secondary buyout of EAT from 3i.

London-listed 3i has sold its stake in UK sandwich and coffee company EAT to Glasgow and London-based Penta Capital in a £39 million (€57 million, $70 million) refinancing, of which Barclays Bank has committed £18 million.


3i originally acquired a 42 percent stake in EAT in 1997 and has backed the company in four successive investment rounds.


The £39 million transaction has provided Penta Capital with a substantial minority stake and EAT with development capital funding to expand its number of outlets to 100 shops within a three year time frame.


The deal is the second management buyout for the Barclays leveraged finance team in Scotland in a week, following its backing of the £55 million MBO of defence sector supplier, Racal Acoustics.


EAT prepares and sells a range of freshly made sandwiches, soups, salads, hot pies and coffees to over 200,000 customers every week. The company currently employs 720 staff and expects to double its workforce by 2008.


Founded in 1996 EAT has grown from the first shop’s launch in London in October that year to 45 stores across the country currently, 35 of which are in Central London. EAT had turnover of £29.1 million for the year to 30 June 2005, with a forecast of £37.7 million for the current year. 


“3i got the business when it was very small, and it has grown significantly in the last couple of years,” Torquil Macnaughton, founding director of Penta Capital told PEO. “We’re looking at a very focused strategy to grow the business concept.


“We know the leisure industry quite well, we understand the dynamics of the sector and the trends, and we’re seeing a move towards fast, casual dining in the UK, which is a follow on from what’s happened in the US over the last few year.”


Following the transaction, Niall MacArthur will continue as managing director, while Macnaughton will be appointed to the board as a non-executive director. Guy Harvey, formerly finance director at Conran Restaurants, will also join as finance director of EAT.


Penta Capital floated La Tasca, a Spanish restaurant chain in the UK serving tapas, Spanish wines and beer, on AIM in February of this year with a market capitalisation of approximately £54 million.


The EAT acquisition is the first to be drawn from the £75 million extension made to Penta’s maiden fund in March. Penta Fund I was increased by £75 million through commitments from existing investors and new LPs AXA Private Equity, Bregal and Goldman Sachs.