Hedge funds and Private Equity - PES

Gate Gourmet
1. Company description
For a long time Gate Gourmet was considered SwissAir’s “Crown Jewel”. The company was
worth roughly 6 billion Swiss Francs before the bankruptcy of Swissair and the 9/11 impact on
the aviation sector. Gate Gourmet, was bought by Texas Pacific Group in 2002 for around
CHF 1 billion. Gate Gourmet’s then CEO welcomed the sale with these words: “Through a combination
of strategic acquisitions and organic growth, Gate Gourmet should experience continued
success.” At the time of its acquisition by Texas Pacific Group, Gate Gourmet employed
over 26,000 workers in 33 countries with 144 flight kitchens.
As Gate Gourmet was formerly the wholly-owned airline catering division of SwissAir, Gate Gourmet
were publicly listed. After the Texas Pacific Group acquisition Gate Gourmet is now a privately
held company. In practice this means that almost none financial details concerning the
company are disclosed.
2. Economic and social effects
2.1 LBO description (offshore base, activity focus, etc.)
Texas Pacific Group (TPG) is a leading global private investment firm with over $30 billion of
capital under management. TPG manage several types of funds including private equity, venture
capital and public equity and debt investing. The firm was founded in 1992. Holdings have
included stakes in technology (Seagate Technology, ON Semiconductor), consumer franchises/products
(Burger King, Ducati), retailers (J. Crew, Petco), airlines (Continental, America
West), and entertainment (Metro-Goldwyn-Mayer). In 2006 Texas Pacific Group raised a $15 billion
sized buyout fund.
2.2 Effects on job creation, investments in training and education
of labour force, investment in innovation
Workers at Gate Gourmet have experienced severe job cuts since being acquired by Texas
pacific group. At the time of the acquisition, Gate Gourmet employed 26 000 workers operating
144 flight kitchens. The company today operates 97 flight kitchens with 20 000 employees,
despite the fact that airline traffic has recovered from the 9/11 shock.
On March 2, 2006, Reuters reported the following: A day after Texas Pacific Group joined other
powerful private equity houses in a call for more transparency; the firm’s mystery sell-off of
Gate Gourmet reveals just how much work the industry has ahead of it. TPG, which bought the
airline catering firm in late 2002 from Swissair, has quietly reduced its stake in the business
over the past year without any disclosure, selling the last piece to Merrill Lynch on Thursday.
Gate gourmet employees learned about it through the press.
Especially one round of job cuts has caught the attention of the media and public:
In August 2005 some 800 workers were sacked by the airline caterer Gate Gourmet at London
Heathrow airport. The Transport and General Workers Union (T&G) had been in negotiations
with Gate Gourmet since February over measures to deal with a massive projected operating loss
at Heathrow. A rescue package was put forward in June, but when it became clear that management
was excluded from the cost-cutting measures, the workforce rejected the package. In
Annex – 21 Case studies
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