Canadian speciality food group Premium Brands Holdings has acquired Isernio’s, a sausage maker with operations in the Pacific north-west of the US.
Isernio’s generates annual sales of US$14m. Premium Brands said the deal would be immediately accretive to cashflow and earnings. The group agreed to pay a purchase price of $12m, consisting of $8.7m in cash and a $3.3m promissory note bearing interest at 6%, amortised over ten years and callable after five years. Premium Brands will complete the acquisition via its Washington-based subsidiary, Hempler Foods Group.
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Isernio’s operates out of a new 28,000 square foot production facility based in Kent in Washington state.
“We are very honoured to become the new owner of this great company,” said George Paleologou, president and CEO of Premium Brands. “This will bring together two of the US pacific northwest’s most iconic specialty packaged meat brands: Hempler’s and Isernio’s. Both are known for great tasting, top quality products made with wholesome ingredients and long histories of involvement with their local communities.”
Paleologou said Premium Brands is “very confident” it will be able to accelerate Isernio’s growth rate, which has been “double digit” in recent years. He said the group would leverage Premium Brands’ sales and marketing infrastructure in the US and Canada.
Stephen Bates, president of Hempler’s, added the addition of a second production plant will enable it to meet growing demand. “Our compounded growth of more than 20% over the past several years has created ongoing production capacity challenges for us,” noted Bates.
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By GlobalDataDerek Dley, an analyst with Canaccord Genuity, said this aspect of the deal was “significant” for Premium Brands. “Given that Premium Brands is expanding capacity, the acquisition of Isernio’s new 28,000 square foot production facility was also a significant motivation behind the transaction, in our view.”
According to Dley, Premium Brands is an “attractive growth story” – but the company’s high debt leverage levels may inhibit its ability to pursue further M&A. “The company has recently commented that the acquisition pipeline remains robust. However, with Premium Brands Holdings’ net debt/EBITDA remaining elevated at 3.9x (including convertible debentures), we believe the company’s balance sheet is currently stretched, meaning any acquisition activity over the near term will likely be minor in the absence of a de-leveraging event.”
