Snyder’s-Lance shakes up portfolio
CHARLOTTE, N.C. — Two transactions this week have set the stage for Snyder’s-Lance, Inc. to reshape its portfolio with a heightened focus on branded products, particularly in growth categories such as “better-for-you.”
On May 7, Snyder’s-Lance agreed to acquire Baptista’s Bakery, Inc., a maker of baked snack foods and “better-for-you” snacks, while separately agreeing to sell its private brands along with two manufacturing facilities in the United States and Canada to Shearer's Foods, L.L.C., a provider of private label snacks headquartered in Massillon, Ohio.
Financial terms of the Baptista’s Bakery acquisition were not disclosed, but as part of the deal, Snyder’s-Lance will acquire 100% of Baptista’s Bakery, Inc. and its manufacturing facility in Franklin, Wis.
“Baptista’s is a leader in highly differentiated snacks, and we’re excited to be working with their talented, creative team,” said Carl E. Lee Jr., president and chief executive officer of Snyder’s-Lance. “Baptista’s is a company that has excelled in providing exceptional product quality and innovation while commercializing production in ways that are effective and unique.”
In a May 8 conference call with analysts to discuss first-quarter results, Mr. Lee expanded on the acquisition, saying it will fuel Snyder’s-Lance’s innovative capabilities “because they have a very strong R.&D. team, which has a long successful track record of creating very innovative, very premium items.”
“It enhances our focus on premium high growth categories,” he said. “And one of the things that we find very attractive is recently their facility was certified for organic production. It clearly expands our better-for-you product portfolio beyond the current level of 25%. It adds some needed production capabilities. It also creates some real synergies, from a purchasing standpoint, for both of the companies to be much more efficient together.”
Mr. Lee said Snyder’s-Lance also is excited about the location of Baptista’s 260,000-square-foot facility in Franklin.
“Both our pretzel factories, one’s on the East (coast), one’s on the West coast,” he said. “This gives us an exciting location in the middle of the country. They develop and produce … very premium, very specialized items with very flexible and very capable production equipment. The organic and gluten-free status are very important to our consumers and also to our ability to reach and expand our portfolio.
“Many of their products include wheat and rice and multi-grain corn and potato, all leading ingredients for ‘better-for-you’ items. They also are able to enrich with calcium and fiber and other ways to, again, fortify and improve our product offering. They have a wide variety of packaging capabilities, which are very important, because you can indeed lead innovation with packaging by itself, and a very new and well managed plant that was built within the last 15 years.”
Completion of the transaction is subject to regulatory approvals as well as customary closing conditions. The transaction is expected to close in the second quarter of this year.
Baptista’s Bakery was established following the sale of Gardetto’s Bakery to General Mills, Inc. in August 1999. Baptista’s manufactures sheeted and extruded snack products. According to the company, the products are baked, low in oil, salty or sweet snacks made primarily from potatoes, corn, rice, oats or wheat.
Separately on May 7, Snyder’s-Lance said it has entered an agreement to sell its private label snack business to Massillon, Ohio-based Shearer’s Foods, Inc. for $430 million. Two manufacturing plants, one in Burlington, Iowa, and the other in Ontario, will be part of the transaction.
Shearer’s Foods is a private label snack manufacturer. The company has manufacturing plants in Arkansas, Ohio, Oregon, Texas and Virginia. Products manufactured by the company include several snack chip varieties and extruded snacks.
Shearer’s is owned by the private equity firm Wind Point Partners, Toronto. In April, the company acquired Medallion Foods, Newport, Ark., from ConAgra Foods, Inc., Omaha, for $33.5 million. Medallion is a manufacturer of snack chips and extruded snacks items.
“The new owner can indeed improve the progress that we’ve been making over the past couple of years and be able to take this business to new heights,” Mr. Lee said during the conference call. “They are going to be able to focus on private brands and we are going to be able to focus on our branded portfolio.
“I have to admit, we found it very difficult to try to really focus on both brands and private brands, and this is a good opportunity for our companies to be able to step forward in new directions. With the transaction from our side comes a very, very strong management team that is excited about joining Shearer’s and the vision and strategy that that company has for not only the business they’re acquiring but the great progress and success they’ve had already with their salty snack business.
“It provides financial resources for us to do additional M.&A. growth. It also comes at a very good time. We’ve been able to optimize the business, and it should be available to grow much more profitably for the new owner. And the innovation that we put into the pipeline will give them some new tools to work with as they look to expand the business.”
Following completion of the transactions, Mr. Lee said 73% of sales will come from its branded business, up from 61% currently.
Net income at Snyder’s-Lance in the first quarter ended March 29 was $16,816,000, equal to 24c per share on the common stock, down 15% from $19,843,000, or 29c per share, in the same period a year ago. Net revenue was $436,828,000, up 4% from $418,572,000.
“Snyder’s-Lance is off to a good start in 2014,” Mr. Lee said. “As we discussed in our last earnings call, we continued developing our core brands with stepped-up investments to support the first-quarter new products roll-out by significantly increasing our spend over last year. In addition to these marketing initiatives, during the first quarter we introduced a substantial number of innovative new product offerings, including Snyder’s of Hanover Sweet and Salty pretzel pieces, Korn Krunchers and our successful line of Lance Bolds sandwich crackers.
“Snyder’s of Hanover pretzels had strong growth, driven by the new products and innovation while we also expanded the distribution of our Cape Cod kettle-cooked chips in the western regions of the country, helping to increase revenues substantially when compared to the first quarter of 2012. Just as exciting, we once again saw double-digit revenue growth and market share growth compared to the prior year for our Snack Factory Pretzel Crisps pretzel crackers, and we have put in place robust marketing and development initiatives focused on our Lance sandwich crackers.”