B&G Foods has said it will continue to look at acquisition opportunities, despite making three in nine months, but said any it makes will have to be “very compelling”.
In May, B&G completed the acquisition of the TrueNorth brand and in June entered into an agreement to buy Pirate Brands, a leader in the all-natural snack foods category. In October last year it also acquired the New York Style and Old London brands.
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Karru Martinson, Deutsche Bank research analyst, said that with three M&A transactions in the past nine months, B&G “certainly has the balance sheet here”. She questioned whether the company might still be looking to “add new vehicles” in the snacks category or be looking to “bolster some of the portfolio [it has].
Speaking on the firm’s earnings call yesterday (18 July), CEO David Wenner said there are “certainly opportunities in snacks”, adding that “everybody who owns the snack business wants to sell us their snack business”.
Wenner, however, said the propositions were “not very compelling” in the vast majority of cases.
“I guess we’re known as a buyer. But it would have to be an extremely compelling proposition for us to be interested in the snack business. Right now, we have a very full docket here, bringing two product lines back into a respectable growth mode and continuing what has been a very, very good trend in the Pirate Brands. So we have a lot to work on in the snacks right now as it is.”
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By GlobalDataNonetheless, Wenner suggested this was unlikely to deter the company from making future acquisitions if the deal was right.
“That doesn’t mean we wouldn’t move on a very compelling proposition, but we’re going to be extremely selective. Not so much on the grocery side. We’re still very interested in buying things in grocery. But again, we’re very selective in general, and it would have to be the right profile of business and fit the acquisition model that we’ve been executing for the last 15 years.”
B&G yesterday saw its earnings tumble in the first half as higher sales were more than offset by charges related to debt refinancing and acquisition costs.
In the six months ended 29 June, net profit amounted to US$18.2m. This was a 44.5% drop on the prior year. The decline was a result of $18.7m of after tax charges relating to refinancing and acquisition-related transaction costs.
Despite the fall, Wenner said the second quarter was a “very active” quarter, having reached agreements two purchase two snacks businesses. He said the quarter was “good” in terms of overall performance.
“We believe that the work we’ve done in the second quarter positions the business to perform very well in the second half. Between new product distribution gains, highly predictable costs, two new acquisitions and an improved capital structure, the business is poised to deliver double-digit top line growth and double-digit adjusted EBITDA growth at the midpoint of our revised adjusted EBITDA guidance.”
Indeed, B&G increased its adjusted EBITDA guidance for fiscal 2013 to a range of $187m to $191m from its previous range of $180 to $184m.
“The latest acquisitions are immediately accretive, though their full benefit will phase in as the year proceeds,” Wenner said. “Our employees have a lot on their plates, but as we have proven in the past, this is what we do. And as we do it well, our company and our shareholders prosper.”
