In Finance by Clyde Mooney

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KKR has ended speculation, announcing acquisition of a “majority share” in the fast-growing Dixon Hospitality Group for an undisclosed amount.

Dixon (DHG) stormed onto the Australian hospitality scene in 2012, expanding upon the ‘party’ boat business of former Spotless CEO Bruce Dixon and son Michael.

Bringing some high-profile business backers, DHG purchased one venue, then another, then quickly set about major expansion courtesy of full portfolio acquisitions of the Open Door Pub Co’s 17 pubs, the three Drink n Dine pubs, and the five Beer Deluxe pubs.

The leasehold-only business model projects strong returns through its f&b and experience-based hotel and restaurant operations, and has specifically adopted only pubs without gaming.

Since the beginning it has entertained the idea of an IPO for its accumulated portfolio, now counting 48 venues, with valuation expected around $186 million. But it was confirmed earlier this year the IPO was ‘on hold’ indefinitely.

KKR (Kohlberg Kravis Roberts) is a major player in global investment, across asset classes including private equity, energy, infrastructure, real estate, credit and hedge funds. KKR helped fund Dixon into the purchase of six of the Keystone Group venues, being sold under receivership, for a price believed to be around $40m.

The debt facility with KKR was understood to be due upon completion of the IPO, and its failure prompted speculation KKR would execute another course of recovery on its investment.

Today saw the announcement that KKR and DHG have begun a “partnership” whereby KKR will acquire a majority stake in the company led by founder and executive chairman Bruce Dixon and CEO Paul Waterson. The announcement stated that “Dixon Hospitality is well-positioned to meet patrons’ expectations at a time when consumers are increasingly dining outside of the home, watching more sports in pub, bar and restaurant venues, and consuming more craft beer and premium food and beverage products”.

“We are extremely pleased to welcome KKR as an experienced partner,” furthered Bruce Dixon. “We have known and held the KKR team in high regard for a long time, and their investment is a strong endorsement of the outlook for our business.

“We’re confident this partnership will position the company for long-term success.”

Scott Bookmyer, Member of KKR and Head of KKR Australia was similarly buoyant.

“KKR is proud to partner with Dixon Hospitality, a leading player in the Australian hospitality industry with a strong focus on delivering a differentiated dining experience to customers across the country.

“We are excited to work together with Dixon Hospitality’s experienced team.”

KKR has been investing in Australia through its pan-regional private equity funds since 2006, to date deploying more than A$3 billion.

KKR’s Asia Pacific private equity platform pronounces a “flexible approach” across both traditional control transactions and growth equity stakes in companies, and “leverages the Firm’s industry expertise and operational capabilities to add value”.

Purchase into DHG comes via KKR’s recently closed US$9.3 billion Asian Fund III. It was not revealed how much – if anything – KKR has paid beyond its debt facility to be the majority stakeholder in DHG.

KKR is understood to be also involved with bidding (against Tabcorp) to buy gaming giant Tatts Group, not sharing DHG’s distaste for poker machines, and opening possibility DHG will not retain its no-gaming policy.