Smart Balance, Inc. (Nasdaq:SMBL) today announced it has signed a
definitive agreement to acquire Udi's Healthy Foods, LLC (Udi's)
for $125 million in cash from majority shareholder Hubson
Acquisition, LLC, an affiliate of E&A Industries based in
Indianapolis, the family of founder Udi Bar-on, and other minority
holders. The acquisition will be treated as an asset purchase for
tax purposes. As a result, the Company expects to realize future
tax benefits with a present value of approximately $22 million¹,
resulting in an effective purchase price of approximately $103
million.
Based in Denver, CO, Udi's markets gluten-free products under
the "Udi's Gluten Free Foods" brand in the retail market, and since
mid-2011, food service channels. Udi's is a leading brand in
gluten-free bread and baked goods. In addition, Udi's markets other
gluten-free products including frozen pizza and granola. In the
twelve month period ended March 31, 2012, Udi's sales doubled to
$60.9 million.
Transaction Highlights:
- Smart Balance has agreed to pay Hubson Acquisition, LLC, an
affiliate of E&A Industries, the family of founder Udi Bar-on,
and other minority holders a total of $125 million in cash, subject
to customary adjustments.
- The acquisition will be treated as an asset purchase for tax
purposes. As a result, Smart Balance expects to realize future cash
tax benefits with a present value of approximately $22 million¹,
resulting in an effective purchase price of approximately $103
million.
- The acquisition, as well as the refinancing of existing
outstanding debt, will be financed with the proceeds of a new $280
million senior secured credit facility, which will include a $40
million revolver.
- The Company expects to close the transaction in July, at which
point it expects long-term debt to be approximately $240
million.
- After Smart Balance closes the transaction and determines the
final allocation of the purchase price to the assets acquired,
including amortizable intangibles, as well as the terms of the
financing, the Company plans to be in a position to provide its
financial outlook for Udi's in connection with its Q2-2012 Earnings
Report.
- For 2013, the Company expects the transaction to be accretive
to cash EPS².
Commenting on the announcement, Chairman and Chief Executive
Officer Stephen Hughes stated, "We are excited to add Udi's Healthy
Foods to our portfolio of health and wellness brands. Udi's
has built a strong brand with a very loyal following in gluten-free
bread, which includes over 1,000,000 'Friends of Udi's' social
marketing followers. Udi's leading bread and bakery portfolio
is the perfect complement to Glutino's wide range of grocery
products. With this transaction, we will offer the most
comprehensive portfolio of gluten-free products to address one of
the fastest growing categories in the food industry. This portfolio
of gluten-free brands and products will enable us to offer all
retailers in North America a one stop strategic partner to address
the growth in gluten-free."
Commenting on the transaction, E&A Industries Partner and
CEO of Udi's Healthy Foods Devin Anderson stated, "This is an
excellent development for the Udi's organization, as it represents
an outstanding opportunity to bring together two companies which
share similar corporate visions, principles and growth objectives
committed to meeting consumer needs. We are proud of our
grassroots, digital and social media strategies that engaged
consumers to help Udi's grow from $4.3 million in net sales in 2009
to an annualized run-rate of $72.4 million in net sales, based on
first quarter 2012 results. Combining our organizations will
allow Udi's to continue on its significant growth path and leverage
Smart Balance's strategic leadership. We look forward to
working together to grow its health and wellness platform and are
confident the Udi's business will thrive under Smart Balance's
direction."
Furthermore, Mr. Hughes stated, "This acquisition will be
transformational to our company, as it will position Smart Balance
as a leader in gluten-free, accelerate our growth rate, and further
diversify our mix toward high-growth natural brands. The
gluten-free category is now a cornerstone strategy within our
corporate vision of creating a health and wellness platform that
addresses highly-motivated consumer need states. As our Smart
Balance®, Earth Balance® and Bestlife™ brands address the health
and wellness needs of consumers, Udi's and Glutino address a
specific dietary need by eliminating gluten in foods that certain
consumers have to avoid for health reasons."
"We see future revenue growth opportunities and cost synergies
throughout our entire organization as a result of this
acquisition. With this acquisition, we believe our sales,
marketing and product development capabilities we are leveraging
with Glutino will help Udi's continue on its remarkable growth
trajectory. We look forward to partnering with our new
colleagues from Udi's to become the experts in gluten-free products
and create a truly comprehensive gluten-free solution for retailers
and consumers," Mr. Hughes remarked.
"Regarding Glutino," Mr. Hughes concluded, "we are beginning to
see benefits associated with the consolidation of this acquisition
and, while reduction of distributor inventory impacted our sales to
customers in the past two quarters, inventory levels are now
stable. As expected, Glutino net sales are now tracking retail
sales."
Citigroup acted as exclusive financial advisor to Smart Balance
in connection with the acquisition. Fried Frank Harris Shriver
& Jacobson LLP served as legal counsel to Smart Balance.
BMO Capital Markets and Citigroup will act as joint-lead
arrangers in financing the transaction. BofA Merrill Lynch acted as
exclusive financial advisor to Udi's Healthy Foods and Bose
McKinney & Evans served as legal counsel.
Smart Balance will host a conference call on June 1, 2012 at
9:30 a.m. ET to further discuss this announcement and review a
Power Point presentation on the investor section of its
website. The dial in number is 1-800-862-9098 from the United
States or 1-785-424-1051 from elsewhere. The conference ID is
BALANCE. A simultaneous audio webcast will be available at
www.smartbalance.com.
¹ Tax benefit with a PV of $22 million assumes a 40% tax rate
for a period of 15 years and an 11% WACC.
² Cash EPS is defined as GAAP EPS plus incremental amortization
of intangibles and depreciation related to the Udi's
transaction.
Forward-looking Statements
Statements made in this press release that are not historical
facts, including statements about the Company's plans, strategies,
beliefs and expectations, are forward-looking and subject to the
safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. These statements may include use of the words
"expect", "anticipate", "plan", "intend", "project", "may",
"believe" and similar expressions. Forward-looking statements
speak only as of the date they are made, and, except for the
Company's ongoing obligations under the U.S. federal securities
laws, the Company undertakes no obligation to publicly update any
forward-looking statement, whether to reflect actual results of
operations, changes in financial condition, changes in general
economic or business conditions, changes in estimates, expectations
or assumptions, or circumstances or events arising after the
issuance of this press release. Actual results may differ
materially from such forward-looking statements for a number of
reasons, including (i) the Company's ability to: maintain and grow
those revenues derived from our Smart Balance® buttery spread
products from which we generate a substantial portion of our
revenues; maintain margins during periods of commodity cost
fluctuations; introduce and expand distribution of our new
products; meet marketing and infrastructure needs; respond to
changes in consumer demand; respond to adverse publicity affecting
the Company or industry; maintain our performance during difficult
economic conditions; comply with regulatory requirements; maintain
existing relationships with and secure new customers; continue to
rely on third party distributors, manufacturers and suppliers;
successfully integrate and operate the Glutino business and realize
the expected benefits of the Glutino acquisition; operate outside
of the U.S.; successfully maintain relationships with the
co-packers for our Glutino® and Gluten-Free Pantry® products; grow
net sales in a competitive environment and with increasingly price
sensitive consumers; and maintain volume in light of price
increases stemming from rises in commodity costs; (ii) the
Company's ability to successfully integrate and operate the Udi's
business and realize the expected benefits of the Udi's
acquisition; potential changes to future tax rates; the possibility
that the transaction may not be consummated in a timely manner, or
at all, including as a result of difficulty obtaining required
regulatory approvals or third party consents; unexpected costs,
charges, liabilities, or expenses resulting from the transaction;
the cost of financing the transaction may be greater than the
Company anticipates; potential adverse reactions or changes in
business relationships resulting from the announcement or
completion of the transaction; and the possibility that Udi's
growth may occur at a rate less than the Company anticipates; and
(iii) those other risks and uncertainties set forth in the
Company's filings with the SEC.
About Smart Balance, Inc. Smart Balance, Inc.
(Nasdaq:SMBL) is committed to providing superior tasting,
solution-driven products in every category it enters. The
Company's health and wellness platform consists of four brands that
target specific consumer needs: Smart Balance for heart
healthier diets; Glutino for gluten-free diets; Earth Balance for
plant-based diets; and Bestlife for weight management. The
Company markets the Smart Balance line of products, which avoids
trans-fats naturally and balances fats and/or reduces saturated
fats, such as Smart Balance® Buttery Spreads and Enhanced
Milks. The Company's Glutino brand is a trusted pioneer
and leader in the gluten-free category, with a wide variety of
great-tasting gluten-free foods consumers trust across a number of
product categories, such as Glutino® Pretzel Twists and Breakfast
Bars. The Company markets the Earth Balance line of
non-GMO plant-based products, which include Earth Balance® Buttery
Spreads, Nut Butters and Soy Milks. The Company also markets
weight management products under the Bestlife brand,
which include Bestlife™ Buttery Spreads and Sticks. For
more information about Smart Balance, Inc., please visit
www.smartbalance.com.
About Udi's Healthy Foods, LLC
Udi's Healthy Foods LLC (Udi's) is a leader in the fast growing
market for gluten-free foods in North America. Udi's markets a
diversified and growing range of gluten-free products under the
well recognized Udi's Gluten Free Foods brand in the retail market,
and since mid-2011, food service channels. Udi's Gluten Free
Foods is a leading brand in gluten-free bread and bakery
products. In addition, Udi's markets other gluten-free
products in the frozen pizza and granola categories.
About E&A Industries, Inc
E&A Industries partners Al Hubbard and Devin Anderson have a
long history of acquiring and growing companies throughout North
America and Europe. E&A is not a private equity firm, but
experienced operators who partner with small business owners to
create long term capital appreciation through sales and marketing
expertise, disciplined management and organic growth.
CONTACT: Media Contact:
Brent Burkhardt
TBC Public Relations
bburkhardt@tbc.us
410-986-1303
410-299-2528 (after 8 p.m.)
Investor Contact:
Carole Buyers, CFA
Senior Vice President Investor Relations
& Business Development
Smart Balance, Inc.
cbuyers@smartbalance.com
303-652-0521 x152
Non Financial Contact:
Devin Anderson
CEO E&A Industries
danderson@eaindustries.com
317-684-3150 x105
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