Highview Capital and Alvarez & Marsal Capital Partners have formed GS Foods Group to acquire Gold Star Foods from Castle Harlan and merge the company with Good Source Solutions, a current portfolio company of Highview.
Gold Star is a food distributor to K-12 schools in California, Arizona and Nevada. The company serves more than 500 school districts comprised of more than 3,500 schools and provides more than 4.2 million meals daily. Many of these meals are provided through federal and state programs for breakfasts and lunches that include program-approved healthy ingredients.
Gold Star purchases products from more than 600 food manufacturers and farms, and sells over 6,000 products comprised of refrigerated, frozen and dry menu items as well as fresh bread and produce. The company, led by CEO Sean Leer, has facilities and operations across the Southwest and is headquartered near Los Angeles in Ontario, CA (www.goldstarfoods.com).
Good Source Solutions, with annual revenues of more than $200 million, is a specialty food distributor to the education, corrections and foodservice markets. Good Source’s products focus on center-of-plate items including poultry, meats, pasta, fruits, vegetables, bakery items, beverages, appetizers, sides, and snacks. The company, led by CEO Rich Friedlen, is headquartered in Carlsbad, CA (www.goodsource.com). Highview acquired Good Source in July 2018 from Evergreen Pacific Partners.
The operations of Gold Star and Good Source will be combined under a new holding company called GS Foods Group; however, Gold Star and Good Source will continue to operate as independent brands. Mr. Leer will function as both the CEO of GS Foods Group and president of Gold Star, and Mr. Friedlen will be the president of Good Source. The combined company will have a national footprint with a market presence across the United States, serving over 8,000 customers nationwide.
“This is a transformational deal, uniting two specialized foodservice powerhouses, which together will have a broad national footprint with highly complementary strengths,” said Ryan McCarthy, co-founder of Highview. “Specialized foodservice distribution is a highly fragmented industry, and market leaders are differentiated by the sophistication and scale of their distribution network, as well as their commitment to quality and to satisfying the customer. We believe both Gold Star and Good Source more than meet these criteria, and we are excited to partner with and continue to support both brands.”
Castle Harlan acquired Gold Star from Prospect Partners in April 2014. During the 5.5-year hold, Gold Star’s sales increased by 57 percent and EBITDA rose by 153 percent buoyed by both internal growth and add-on acquisitions.
In June 2017, the company acquired Anaheim, CA-based A&R Wholesale Distributors and in August 2014 it acquired Fairfield, CA-based Ed Jones Food Services. To expand its technology capabilities, Gold Star acquired Phoenix-based Colyar Technology Solutions, a developer of food distribution and USDA compliance management software, in March 2017. Together, Gold Star and Colyar developed Cartewheel, an integrated software product used in school menu planning. In June 2016, Gold Star opened a newly constructed 188,000-square-foot distribution center in Dixon, CA to serve Northern and Central California schools. According to Castle Harlan, the company is now the largest US food distributor in the K-12 school market. Excluded from Good Source’s buy of Gold Star is Colyar which will be retained by Castle Harlan.
“Gold Star has been a highly successful investment for Castle Harlan and its limited partners,” said David Pittaway, vice chairman of the firm. “In addition to its distribution growth, today it offers technology solutions for states and school districts that no other company provides.”
Castle Harlan makes control investments in middle-market companies in North America, Europe and Australia. The firm has raised eight private equity funds – five in the United States and three in Australia – totaling more than $6 billion in capital commitments. Castle Harlan was founded in 1987 and is based in New York.
“In partnership with Castle Harlan, Gold Star has grown to be the premier school nutrition solutions provider. We are looking forward to our next chapter with Highview Capital and Good Source, where we will leverage our collective strength to establish a new leader in specialized foodservice distribution for the K-12, corrections and other value-focused end markets,” said Mr. Leer.
Alvarez & Marsal Capital Partners (AMCP) partnered with Highview Capital on the formation of GS Foods Group and made a direct investment in the company. AMCP makes control and significant minority investment of $40 million to $150 million in North American-based companies that have from $10 million to $75 million in EBITDA. Sectors of interest include business services, industrials, healthcare, consumer and retail, government services, financial services, and energy services. AMCP is headquartered in Greenwich, CT.
Highview Capital, headquartered in Los Angeles, invests from $10 million to $125 million of equity in companies with revenues of $50 million to $500 million and EBITDA of $5 million to $50 million. Highview invests in many sectors and is effectively industry agnostic. The firm sources its capital from a $500 million evergreen fund and is backed by Karlin Asset Management, a Los Angeles-based investment company (www.highviewcp.com).
© 2019 Private Equity Professional | October 3, 2019