Flowers Foods’ move to acquire Tasty Baking Co. builds on its strategy to drive branded sales and expand its geographic reach, a spokesperson for the US baker told just-food today (11 April).
Earlier this morning, Flowers announced that it has entered into an agreement to acquire Tasty Baking – including its TastyKake brand and two “highly efficient” bakeries – in a deal valued at around US$165m.
The company outlined a new “strategic vision” and “growth plan” to investors at the end of last month, insisting that it will focus on expanding revenues both organically and through “smart” acquisitions.
During an investor day at the New York stock exchange, George Deese, Flowers’ chairman and CEO, said that the company aimed for organic growth to add 3-5% to EBITDA, while it was targeting a 2-5% contribution to EBITDA from acquisitions, over the next five years.
In fiscal 2011, Flowers said it anticipates the Tasty Baking acquisition to add $115-125m in sales, $10-12m in EBITDA and be neutral to slightly accretive to 2011 EPS, excluding one-time costs. Meanwhile, in fiscal 2012, the addition of Tasty is expected to contribute $210-$225m in revenue, $25-30m in EBIDTA and $0.06-$0.09 in EPS.
“Flowers Foods will be a key player in the future of the baking industry. We aren’t saying we are going to be the biggest, but we are saying we going to be the best. And if we can become a lot bigger by being the best that’s OK,” he said. “In five years we will be serving at least a minimum of 75% of the population in the United States.”
The Tasty deal is in line with this “new vision” to grow its footprint in grain-based foods, the spokesperson said. The acquisition will expand the company’s geographic reach into new markets, increase capacity and bring synergistic savings.
By extending Flowers footprint, the company has increased its access to 58m US consumers since 2004. Currently, Flowers national market penetration stands at 53%. Following the merger, this will increase to 62% market penetration, the spokesperson emphasised.
In addition, the move adds the “iconic” TastyKake brand to the Flowers’ stable of products, which also comprises of the likes of Nature’s Own. Flowers said that it intended to invest in TastyKake bakeries, brands, product development. “Over the long term, Flowers believes this is a great opportunity for a well-loved Philadelphia brand to eventually become a well-loved national brand,” the group said.