CHARLOTTE, N.C. — If it is finalized, the acquisition of Diamond Foods by Snyder’s-Lance, Inc. will expand the company’s reach both domestically and internationally. It also will bolster the company’s portfolio of snack products perceived as being better-for-you.
|Lee, president and c.e.o. of Snyder’s-Lance|
“One thing that’s very important here for us is we’re going to have a much stronger West coast presence with our plants,” said Carl Lee, president and chief executive officer of Snyder’s-Lance, in an Oct. 28 conference call with financial analysts. “If you take a look at the Kettle plant in Salem, Ore., and the Diamond plant in Stockton, Calif., that will be two additional manufacturing and operating locations for us on the West coast combined with our Goodyear plant that’s there in Arizona today.
“A Kettle plant also in Beloit, Wis., is an important and strategic location for both sourcing potatoes and also servicing the very important and growing Midwest. And then Kettle Chip, with their operation there in the U.K., again provides a full-fledged operation with sales, marketing and manufacturing based in the U.K., serving the United Kingdom but also Western Europe.”
Snyder’s-Lance announced on Oct. 28 that it had entered into an agreement with Diamond Foods to acquire the San Francisco-based snack maker for approximately $1.9 billion, which includes the assumption of an estimated $640 million in debt. The acquisition is expected to close in early 2016.
The proposed transaction, which has been approved by the boards of directors for both companies, would add such notable brands to the Snyder’s-Lance product portfolio as Diamond of California branded nuts, Kettle Chips and Pop Secret popcorn.
“It allows us to really combine two very important portfolios in a very competitive snacking category, the category where we see new companies and new brands basically enter almost every day,” Mr. Lee said. “Their strength really lies in the natural channel, where they do extremely well. Club and better-for-you supermarket sections are also where you will find them across the U.S.”
Snyder’s-Lance executives anticipate the merger will create approximately $75 million in cost synergies as the two companies are integrated and the transaction is expected to be accretive to Snyder’s-Lance’s earnings per share in year one.
One challenge that may arise for the Snyder’s-Lance management team is walnut supply and demand, which is at the heart of Diamond’s nut business. In the conference call Mr. Lee said there was an increase in production last year and a “bumper crop” is expected this year.
“Let me remind you of our heritage with the Tom’s brand in Columbus, Ga.,” Mr. Lee said. “For over 75 years we have been basically working directly with peanut farmers and taking raw peanuts into our facilities, shelling those, providing finished peanuts and packaging for consumers, and actually grinding and making our own peanut butter every day. So, while the scale may be a little different, we have worked with peanut farmers for a long time to bring their great product to the shelf, either for consumption as roasted peanuts or as peanut butter.“So, we are not really new to this industry, or new. Walnuts are going to be different but some of the same principles in the way we’ve run our peanut business for a long time we’ll be able to apply.”