Packaged food company, B&G Foods, Inc. (BGS) recently completed its previously announced acquisition of Pirate Brands from the New York-based private company, Robert's American Gourmet Food, LLC, for approximately $195 million in cash.
Last month, BGS announced its intention to buy Pirate Brands under which American Gourmet sells its natural snack food products. With the growing importance of nutritious snacking, the acquisition of Pirate’s all-natural, gluten-free and trans-fat free snack brands like Pirate’s Booty, Smart Puffs and Original Tings will boost B&G Foods’ snacks portfolio.
The Pirate’s Booty brand of corn puff snacks is an especially prudent portfolio addition since it has been experiencing double-digit growth for several years and represents 90% of American Gourmet’s sales. B&G Foods’ snacks portfolio also includes New York Style, Old London, JJ Flats and Devonsheer brands which were acquired in Oct 2012.
American Gourmet is owned by VMG Partners, Driven Capital Management and founder Robert Ehrlich. B&G Foods has acquired the entire Pirate Brands business, including its leased headquarters and sales force but excluding its manufacturing facilities. The company funded the acquisition with the remaining net proceeds from the May 2013 senior notes offering and revolving credit borrowings.
Pirate Brands is expected to generate net sales of $80 million to $90 million and adjusted EBITDA (earnings before income tax, depreciation and amortization) of $18 million to $20 million annually after the acquisition.
B&G Foods focuses on acquiring complementary brands that have strong margins and generate less than $100 million in sales. Generally, these are smaller brands from large food companies, which have limited competition. B&G Foods’ investments in these brands help to generate huge free cash flow and ensure profitability in the long run. Prior to the Pirate Brands acquisition, B&G Foods acquired TrueNorth brand from privately-held DeMet’s Candy Company in May this year.
B&G Foods carries a Zacks Rank #1 (Strong Buy). Some other food stocks that are worth a look include Flower Foods Inc. (FLO), Kraft Foods Group, Inc. (KRFT) and Campbell Soup Company (CPB). While Flower Foods carriesa Zacks Rank #1 (Strong Buy), the other two companies hold a Zacks Rank #2 (Buy).
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