Packaged food company B&G Foods Inc. (BGS) recently acquired Rickland Orchards LLC from Natural Instincts LLC – one of the sought-after makers of Greek yogurt-coated granola bars and bites for $57.5 million. Of the total purchase consideration, about $37.4 million was paid in cash and about $20.1 million was paid in shares of common stock of B&G Foods.
Launched in Mar 2012, the Rickland Orchards brand has already generated annualized net sales of more than $50.0 million. We believe its considerable presence in the club, retail, mass and convenience channels and exposure to healthier product portfolio such as Greek yogurt set the brand apart and made it a lucrative acquisition target.
We view the deal as strategically positive for both parties as they operate in the same vertical. Post acquisition, the founder and CEO of Rickland Orchards has joined B&G Foods as executive vice president of the Club Channel. Rickland Orchards COO assumed the position of vice president of Product Innovation at B&G Foods. Rickland Orchards is likely to benefit from B&G Foods’ larger scale of operation.
On the other hand, this acquisition will open up opportunities for B&G Foods in the protein-packed snacks category. B&G Foods is all set to beef up its snack offerings inorganically as evident from its three acquisitions in the last one year, including Pirate Brands from Robert's American Gourmet Food, TrueNorth from DeMet’s Candy Company and New York Style and Old London from Chipita America.
Although all these acquired brands are typically smaller parts of larger companies, all of them have a distinctive competitive advantage, strong margins and generate near about $100 million in sales.
B&G Foods – a Zacks Rank #3 (Hold) company -- is not the only food company looking to expand inorganically. In the recent past, sell-offs and acquisitions have gained momentum in the foodservice industry. Last month, meat-oriented food solutions provider The Hillshire Brands Co. (HSH) inked a definitive agreement to acquire Calif.-based Golden Island – one of the sought-after manufacturers of premium gourmet jerky products.
J. M. Smucker Co.’s (SJM) acquisition of organic and gluten-free ancient grain products maker Enray Inc. in August is also worth mentioning. Another company in the same sector, Flowers Foods Inc. (FLO) carried on its acquisition spree with the takeover of 20 Hostess Bakeries and 5 Bread Brands in July this year.
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