Utz Brands, a leading U.S. manufacturer of branded salty snacks, announced that its subsidiaries have entered into a definitive agreement with Great Lakes Festida Holdings, Inc. and related entities to acquire all of the assets, including the real estate located in Grand Rapids, MI, related to the operation of Festida Foods. The total purchase price is $41 million and is subject to customary purchase price adjustments.
Festida Foods is a leading manufacturer of tortilla chips, corn chips, and pellet snacks, and the largest manufacturer of tortilla chips for Utz’s ON THE BORDER tortilla chip brand, the company said in a press release.
The transaction represents an acquisition multiple of approximately 6.0x fiscal 2020 Festida Adjusted EBITDA of $6 million excluding estimated synergies, and 5.1x fiscal 2020 Festida Adjusted EBITDA including expected run-rate cost synergies of at least $1 million (in each case including approximately $5 million in net present value from expected tax benefits resulting from the transaction).
“We expect that this strategic acquisition will enable strong supply chain synergies for our ON THE BORDER brand and enhance our ability to expand both ON THE BORDER and other Utz Power Brands geographically in the Midwest,” said Dylan Lissette, CEO of Utz Brands.
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“Over time, we intend to expand production capabilities in the manufacturing plant to support growth in adjacent sub-categories and better serve current and future retail customers in an important area of geographic growth for the Company. We believe this strategic combination will help accelerate growth and expand margins over the long term, and we look forward to continuing to serve Festida Foods’ existing customers,” added Lissette.
Utz Brands said it expects the transaction to be accretive to earnings in 2021 and beyond. However, the transaction is subject to customary closing conditions and is expected to close in the second quarter of 2021.
“The Festida Foods team is thrilled to be joining the Utz family,” said Kyle Curtiss, CEO of Festida Foods. “As a premier supplier of tortilla chips to Truco Enterprises and ON THE BORDER, one of the fastest-growing tortilla chip brands in the United States, Utz Brands will be in a position to leverage Festida’s manufacturing expertise, capacity, and warehousing to support its brands in the Midwest.”
Financial Benefits
After eliminating tolling fees between Festida Foods and Utz subsidiaries, Festida generated incremental FY 2020 Net Sales and Adjusted EBITDA of approximately $14 million and $6 million, respectively. Utz Brands expects to receive approximately $5 million in net present value from expected tax benefits resulting from the transaction and achieve run-rate Selling and Administrative cost synergies of at least $1 million. The transaction is expected to be accretive to earnings in 2021 and beyond.
Transaction Details
Under the terms of the definitive agreement, the assets and certain operating liabilities of Great Lakes Festida Holdings, Inc. Subsidiaries of Utz Brands will acquire the real estate owned by a related entity. The Company expects to draw on its revolving credit facility to fund the $41 million cash purchase price.