US: Snyder's-Lance hails Snack Factory cash, brand power
US snack group Snyder's-Lance has said its acquisition of Snack Factory for US$340m will significantly boost sales, cash flow and profit margins.
Snyder's-Lance, which has agreed to purchase Snack Factory from private-equity firm VMG Partners, said that the firm's Pretzel Crisps range will become an "immediate core brand in our portfolio".
Carl Lee, Snyder-Lance's president and COO, told analysts on a conference call that Pretzel Crisps has high growth potential. "We believe there is significant growth on the horizon" he said. "Over the last three years, sales almost tripled and they're growing even faster over the past 12 months."
At the same time, Snack Factory's level of penetration will enable Snyder's-Lance to expand the reach of its existing brands, like Cape Cod and Archway.
At the bottom line, Snyder's-Lance CEO David Singer said Snack Factory has an "unusually strong free cashflow", which will improve the firm's profitability.
He said the acquisition is consistent with the company's strategy to develop and acquire national, premium brands in the US, as outlined in February this year. Many analysts were enthusiastic about the deal. "Snyder's-Lance is paying approximately 9.5 times [Snack Factory forward earnings], which seems reasonable given strong sales growth and cash flow generation, ample runway for continued strong sales gains, and a lofty margin structure," said Heather Jones, analyst at BB&T Capital Markets. "Cost synergies are fairly limited, but the sales synergy opportunity is sizable, in our view," she said in a note yesterday (6 September).
BB&T raised is earnings per share forecast for Snyder-Lance to $0.96 from $0.94 for 2012, and to $1.34 from $1.25 for 2013.
"It is unlikely that Snack Factory will continue to generate 30%+ sales growth, but we believe 15-20% is feasible over the next few years," Jones added.
Snack maker Snyder's-Lance has announced that CEO David Singer will retire following the company's AGM, scheduled for 3 May....
- M&A Watch - Could Cloetta be takeover target?
- Why Arla upbeat about LatAm prospects
- Comment: Can Applegate retain trust under Hormel?
- How the Applegate acquisition will benefit Hormel
- Sweets & Snacks Expo: just-food's pick
- Yildiz eyeing further deals - reports
- PAI, Pamplona "eyeing Bakkavor stake"
- Heinz, Boulder face off in Smart Balance TM spat
- FrieslandCampina ends Bongrain German tie-up
- Wal-Mart acts on animal welfare, antibiotics
- Successful New Product Development Strategies in the Food, Drinks and Personal Care Market
- ALDI 2015: Radically transforming Anglo Saxon grocery markets
- The Future of the Ice Cream Market in the United Kingdom to 2019
- Consumer Foodservice in Indonesia
- Marks & Spencer (Asia Pacific) Ltd in Retailing (Hong Kong, China)