American Securities Capital Partners has exited its El Pollo Loco fast-food chicken chain, selling the company in a reported $400 million (€332 million) deal to Trimaran Capital Partners.
The sale marks the end of a six-year run under the American Securities umbrella for El Pollo Loco. The New York-based firm acquired the business in 1999 for $128 million. The sale of the business will cement a roughly six times return on invested equity for American Securities. The deal is expected to close in the next 45 to 60 days.
American Securities managing director Glenn Kaufman said the investment had to clear a number of hurdles, but ultimately proved to be a success. “In El Pollo, we had found a company that had a great core concept, but it had not previously received sufficient focus, sufficient investment or sufficient strategic direction. The company was clearly not maximizing on its potential,” he said.
Once American Securities took over, more problems arose when Nelson Marchioli, the company’s chief executive officer, left to become the chairman at Advantica Restaurant Group, El Pollo Loco’s former parent. Then came 2002, which Kaufman described as one of the worst years for the restaurant industry in recent memory.
Once Marchioli left, the firm installed Taco Bell veteran Stephen Carley as the CEO. During the industry’s downturn in 2002, American Securities responded by pouring more capital into the business, “reenergizing the brand and upgrading technology,” Kaufman said.
El Pollo Loco also added a number of new locations, climbing from 274 restaurants when American Securities made the acquisition to 328 storefronts today.
Trimaran, meanwhile, anticipates placing a greater emphasis on the geographic expansion of the El Pollo Loco name. In a statement, Trimaran said it has company-owned and franchise commitments in Colorado, Illiniois, New England, New Jersey, New York, Oregon and Washington DC. The company’s current reach stretches across California, Arizona, Nevada and Texas.
Trimaran is also banking on demographic trends to provide some wind at its back. Managing partner Andrew Heyer cited “trends toward healthy eating and the growth of the US Hispanic population” as some of the positive factors that should support the investment.
Banc of America and Merrill Lynch are expected to lead the financing for the deal. American Securities was advised by Banc of America on the sale, while O’Melveny & Myers provided legal counsel. Trimaran was represented by Skadden Arps Slate Meagher & Flom.
The original investment in El Pollo Loco came out of American Securities’ American Securities Partners II, a 1997-vintage, $350 million fund. The firm most recently raised its fourth fund, closing on $1 billion last year.