Smart Balance completes purchase of Udi's

by Eric Schroeder
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PARAMUS, N.J. — Smart Balance, Inc. has completed its previously announced acquisition of Udi’s Healthy Foods, L.L.C. for $125 million in cash from majority unit holder Hubson Acquisition, L.L.C., an affiliate of E&A Industries based in Indianapolis, the family of founder Udi Baron, and other minority unit holders.

The acquisition, as well as the refinancing of existing outstanding debt, was financed with the proceeds of a new $280 million senior secured credit facility, Smart Balance said. In addition, the facility, which has an overall effective interest rate of approximately 7.5%, is comprised of a $240 million term loan scheduled to mature in July 2018 and a $40 million revolving credit facility scheduled to mature on June 30, 2017.

As of the close of the transaction, Udi’s net debt is approximately $237 million.

“We are excited to include Udi’s Healthy Foods in our portfolio of health and wellness brands and believe this transaction to be transformational to our company, as it positions Smart Balance as a leader in gluten-free, accelerates our growth rate, and further diversifies our mix toward high-growth natural brands,” said Stephen Hughes, chairman and chief executive officer of Smart Balance. “As a result, we expect the company’s organic revenue growth rate to accelerate, and we look forward to providing our initial outlook on Udi’s in connection with our second-quarter call on Aug. 2, 2012.”

Smart Balance said it granted option awards for a total of 957,500 shares of common stock to 65 of Udi’s employees as an inducement to join the company in connection with the acquisition. The awards were granted under a newly adopted Smart Balance, Inc. 2012 Inducement Award Plan. The options have a 10-year term and an exercise price equal to the fair market value of company common stock on the date of grant. The options vest in four equal annual installments beginning on July 2, 2013, the first anniversary of the grant date.

The majority of Udi’s sales come from gluten-free bread and other bakery products, such as cookies, buns and muffins.

Smart Balance is based in New Jersey and produces buttery spreads as well as gluten-free products through its Glutino brand. Glutino was acquired in August 2011 as part of Smart Balance’s $66.3 million purchase of Importations DE-RO-MA from Claridge, a Montreal-based investment firm. Glutino, which had sales of $53.9 million in the fiscal year ended March 31, 2011, makes gluten-free snack foods, frozen baked goods, frozen entrees and baking mixes.

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