US baker Flowers Foods said today (31 May) it is keeping a weather eye on further acquisition opportunities as it unveiled plans to buy privately-owned regional peer Lepage Bakeries.
Pending regulatory approval, Flowers will take control of Lepage in a cash-and-stock deal that values the group at US$370m, or 8.7 x EBITDA.
Go deeper with GlobalData
The acquisition, Flowers chairman and CEO George Deese said, must be viewed as part of the ongoing process of consolidation under way in the US bakery sector.
“We have repeatedly said we think this industry is consolidating and this is further proof… with the strong cash flow and the way that we plan to pay down the debt we will still have room to do other things. We will be prudent with that but we will continue to anticipate as the market consolidates,” he said. “We are excited about today and what the future brings.”
Flowers said the Lepage deal would add approximately US$166m in annual sales and extend the group’s distribution in the Mid-Atlantic and north-eastern US.
“We will use their relationships to go forward, to develop our brands in the North East,” Deese said during a conference call with analysts.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataDeese added the acquisition would bring three “highly efficient” bakeries with “available production capacity” and two “strong” regional brands – Country Kitchen and Barowsky’s – under the group’s control.
Flowers plans to introduce Barowsky’s organic brand to its existing markets, he added.
Deese said the group expects the acquisition to generate a return on invested capital of 13-15% within five years. “Our goal is 13-15% [ROIC]… we have no change in our long-term goal with this acquisition. Does it make it immediately? We can’t or won’t say. But our five year goal still stands,” he said.
