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Private Equity's Growing Reach in Food Testing

As food safety issues involving pathogens widen in scope and frequency, food safety testing services are increasingly coming under private equity ownership.

3i Group, rated 13 in the global private equity league, has agreed to buy the UK's largest food testing company Inspicio PlC for USD 467 million. The buyout will be financed with slightly over 50% in equity, a group of banks providing the balance in loans for as yet undisclosed terms.

Inspicio was founded in 2005 to aggressively buy up food and other testing service companies. It now operates in 130 countries with ca. 5,000 employees, thanks largely to the 2005 buyout of the UK-based global testing company Inspectorate. The company can test at every stage of the food chain from seeds, soils, fertilizers and crops to processed foods. Recent Inspicio acquisitions have included the Finnish multi-service testing company Inspecta in 2002 and the French food testing company Carso).

As governments have scaled back and even abandoned their own food testing services (the state-owned Inspecta, for example, was privatized by the Finnish government in 2002) and certification of all sorts has expanded exponentially, the global testing/certification business is estimated to total some USD 71 billion annually. 3i, with a substantial food company portfolio of its own, has actively promoted food testing and certification as an engine for driving sales and consolidation, trumpeting its ability to deliver better results in detecting E-coli in meat than government testing services like the US Department of Agriculture. With Inspectorate, Inspicio's biggest division, focused on oil-based products, Inspicio is now ideally positioned to cash in the biofuels boom.

In a 2003 report on food safety (including a timely reminder of the risks to the food system of terrorist attacks), 3i stated that "Safety scares are driving demand for better food testing and traceability technologies. Global venture capitalists are specialists at matching innovative businesses with networks of suppliers, partners and the food and drinks industry is a good place for us to demonstrate these skills." 3I's current portfolio of food companies includes UK distributors Fosters Traditional Foods, Mionetto (wines, Italy), Monviso (Italy, baked goods), Gestion (France, retail), Refresco (Netherlands, drinks), and Senoble (France, private label dairy desserts).