Hygain, the Australian horse feed business backed by Adamantem Capital, is expected to find a new owner that could boost its growth globally, particularly in the US, said Andrew Bullock, managing director at the private equity firm.

The sale process, managed by Houlihan Lokey, has started with information memorandum (IM) being distributed, Bullock told this news service. A range of interested parties are now in the data room, he noted, without elaborating on the upcoming stages of the sale process.

“We offer the opportunity to own Hygain going forward to American, European and Asian companies, as well as Australian companies,” Bullock said, noting that Adamantem chose Houlihan Lokey because of the advisor’s strong position globally.

The next owner can really make Melbourne-based Hygain, already one of the leading equine nutrition businesses in the world, the best global business by consolidating its current position and growing further in the US, he said.

Without specifying, Bullock said a number of parties that reviewed Hygain last time, before Adamantem bought the business in November 2017, are now looking again. Last time, the business was probably too small for some of the parties, which have AUD 100m (USD 67m) revenue as an investment threshold, but now it is well over that threshold, he said.

Last time Hygain attracted strategic players such as Australia-based Jurox, now owned by New Jersey-based animal medicines, vaccines, and diagnostic products maker Zoetis [NYSE:ZTS]; Parnell [OTCMKTS:PARNF]; Inghams [ASX:ING] and New Zealand-based Tegel [NZX:TGH], as well as PE firms like Pacific Equity Partners and CHAMP Private Equity, now known as CPE Capital, local media reported at that time.

Hygain has a score of 81 out of 100, according to Mergermarket’s Likely-to-Exit (LTE) algorithm. Mergermarket's LTE predictive analytics assign a score to sponsor-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing or a deSPAC transaction.

Growth under Adamantem

Adamantem acquired a majority stake in Hygain in November 2017 for an undisclosed amount, with the business’ founder Greg Manley remaining invested.

Since then, the PE owner managed to do three things for Hygain: grow the business into the equestrian and stud market, grow out of Victoria to be a truly national business, and expand to the US particularly, which is the world’s largest horse market, Bullock said.

Backed by Adamantem, Hygain acquired Mitavite from Inghams for AUD 59.5m (USD 43.73m) in late 2018, which helped the company to grow in New South Wales and produce equestrian and stud products. Now Hygain is the largest horse feed business in Australia, with a 35% market share, the MD said.

In the US, Hygain first entered California but had to slow down due to the COVID-19 pandemic, and then post COVID it went into Florida, Texas and other Eastern states, Bullock continued. Now the company has eight salespeople in the US and generates approximately AUD 1.2m in revenue a month from that market, with its annual revenue in the US doubling every year, he said.

Hygain has huge potential in the US, which is 10x larger than the Australian market, and its products are uniquely different to the American ones. It uses different ingredients to create lower starch and higher protein products and a different manufacturing method to create products like “toasted muesli” instead of pallets, which are more digestible, Bullock explained.

Under Adamantem’s ownership, the business has tripled both in employee number and revenue – 120 employees now from 40 employees and AUD 130m in revenue from around AUD 40m, he said. Hygain is well supported by its lenders ANZ and Metrics, he added.

The company still generates two thirds of its revenue in Australia, with only 10%-15% in the US, he noted.

“The next owner can continue to grow in our traditional markets in APAC strongly, but also grow well in the US,” he said. “They should also be able to manufacture in the US.”

Adamantem has also set the business for the long-term by putting solar panels all over Hygain’s facilities, which results in one third of the company’s power now coming from roof-top solar. It also makes sure its work force reflects the fact that more than 90% of equestrian business owners are women – “those owners don’t like people mansplaining to them” – and looks after animal welfare by feeding retired racehorses, Bullock said.

[Editor's Note: The eleventh paragraph has been amended post-publication to note that Hygain generates approximately AUD 1.2m in revenue a month.]