In a deal that marks its first investment in the franchising business, TorQuest Partners Inc. acquired Canadian weight-loss chain Herbal Magic ULC from Trivest Partners LP, which announced the transaction Thursday.
Terms were undisclosed. Observers previously predicted the company, also called Magic Holdings LLC, could fetch between $100 million and $200 million.
TD Bank Financial Group, Scotiabank and BMO Financial Group provided senior debt for the acquisition, while TD Capital Mezzanine Partners supplied subordinated financing.
Eric Berke, a managing partner at Toronto-based TorQuest, said the Herbal Magic franchise business has been highly successful in helping clients manage weight loss.
"The success of the program is outstanding," he said.
London, Ontario-based Herbal Magic manages more than 330 franchised units across Canada that offer weight-loss programs and counseling. They sell more than 70 herbal products and vitamins for energy, weight management and overall health maintenance.
The company also has eight stores in Michigan that operate under the Nutri Magic name.
Berke declined to comment on the company's financial performance or the deal's capital structure, citing confidentiality agreements.
Herbal Magic has about C$60 million ($54 million) in sales, according to Trivest's Web site. Its Ebitda is in the "high teens," a source said.
The company's growth strategy will revolve around adding new locations across Canada and possibly in the U.S. Besides Berke, TorQuest's deal team included senior managing partner Brent Belzberg, partner George Rossolatos and principal Daniel Sonshine.
Trivest, a Miami private equity firm, declined to comment on its return from the sale.
In a statement, Trivest partner Peter "Chip" Vandenberg Jr. said Herbal Magic "performed well above expectations."
When the buyout shop acquired Herbal Magic in December 2003 for an undisclosed sum from its founder, Dieter Decker, the company had 228 outlets. After Trivest appointed former Tim Hortons Inc. chief financial officer Tom McNeely, the number of units grew by nearly 45%.
CIBC World Markets Inc. launched a broad auction of Herbal Magic in early summer and drew strong interest from financial buyers, a source said.
Blake, Cassels & Graydon LLP was counsel to Trivest. The transaction is the second private equity exit of a weight-loss business in 2006. MidOcean Partners LLP and ACI Capital Co. LLC sold Carlsbad, Calif.-based Jenny Craig Inc. to Nestlé SA for close to $600 million.