Premium Brands Holdings said the deal had been made through its Washington-based subsidiary Hempler Foods Group. The transaction is expected to close next month.
The purchase price under the terms of the transaction is US$5m, which Premium said would be adjusted if the net working capital of Fletcher’s US at closing is above or below a defined normalised level. The transaction is expected to be immediately accretive to both Premium Brands’ earnings.
Fletcher’s US sells bacon and fresh sausage products in the US Pacific Northwest. It generates annual sales of around US$17m.
The deal sees much of Fletcher’s US return to Premium Brands Holdings. The Canadian group was founded in 1917 in Vancouver, initially carrying on business under the name Fletcher’s and later Fletcher’s Fine Foods Ltd.
In 1985, the then Fletcher’s Fine Foods Ltd. set up Fletcher’s US. Fletcher’s Fine Foods Ltd. completed an initial public offering in November 1996 and began trading on the Toronto Stock Exchange.
In 2000, the company’s then controlling shareholder decided to sell its interest in the business. At the same time, Fletcher’s Fine Foods Ltd.’s name was changed to Premium Brands Inc. In 2004, the then Premium Brands Inc sold the Fletcher’s US business, which was based in Algona in Washington state.
A year later, Premium Brands Inc was converted from a publicly-traded corporate entity to a publicly-traded income trust, becoming Premium Brands Income Fund. Four years later, the fund was converted to a publicly-traded corporation and renamed Premium Brands Holdings.
Under the terms of the transaction announced yesterday (15 August), Hempler’s will purchase the business and production equipment of Fletcher’s US, but not its plant in Algona. Correspondingly, Hempler’s will transfer production of Fletcher’s US’ products to other manufacturing facilities in the US including its plants in Ferndale and Kent in Washington.
The deal comes just a week after Premium Brands Holdings’ president and CEO said his group’s “acquisition pipeline remains very active and we fully expect to complete several more accretive acquisitions this year”.
Paleologou said yesterday: “This transaction fits perfectly with our strategy of investing in companies with strong regional brands then providing their talented management teams with the resources needed to further strengthen their business and help accelerate their growth.”
He claimed the deal “brings together three of the US Pacific Northwest’s most iconic speciality packaged meat brands, namely Hempler’s, Fletcher’s, and Isernio’s, which we acquired just last year” and added: “All of these brands are known for their authentic, top quality, specialty products and their long histories of community engagement and charitable giving.”