Packaged food company, B&G Foods, Inc. (BGS) recently announced that it has entered into a definitive agreement to acquire Pirate Brands from the New York-based private company, Robert's American Gourmet Food, LLC, for approximately $195 million in cash.
American Gourmet does its business as Pirate Brands, which are natural snack food products. With the growing importance of nutritious snacking, the acquisition of Pirate’s all-natural, gluten-free and trans-fat free snack brands like Pirate’s Booty, Smart Puffs and Original Tings will boost B&G Foods snacks portfolio. The Pirate’s Booty brand of corn puff snacks is an especially prudent portfolio addition since it has been experiencing double-digit growth for several years and represents 90% of American Gourmet’s sales.
American Gourmet is owned by VMG Partners, Driven Capital Management and founder Robert Ehrlich. B&G Foods is acquiring the entire Pirate Brands business, including its leased headquarters and salesforce but excluding its manufacturing facilities.
Pirate Brands is expected to generate net sales of $80 million to $90 million and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $18 million to $20 million annually after the acquisition. The acquisition is expected to close in July and BGS will fund it with its remaining net proceeds from the May 2013 senior notes offering and revolving credit borrowings.
B&G Foods’ snacks portfolio also includes New York Style, Old London, JJ Flats and Devonsheer brands, which were acquired in Oct 2012. Last month, B&G Foods acquired the TrueNorth brand from privately held DeMet’s Candy Company.
B&G Foods focuses on acquiring complementary brands that have strong margins and generate less than $100 million in sales. Most of the time, these are smaller brands from large food companies, which have limited competition. B&G Foods’ investments in these brands help to generate huge free cash flow and ensure profitability in the long run.
B&G Foods carries a Zacks Rank #3 (Hold). Some other food stocks that are worth a look include Flower Foods Inc. (FLO) carrying a Zacks Rank #1 (Strong Buy) and J&J Snack Foods Corp. (JJSF) and Campbell Soup Company (CPB), both holding a Zacks Rank #2 (Buy).
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