Fastest-growing gluten-free bread loaf brand in U.S. brings strong growth potential
THOMASVILLE, Ga., Nov. 7, 2018 /PRNewswire/ -- Flowers Foods, Inc. (FLO) today announced a definitive agreement to acquire Canyon Bakehouse LLC, a privately held, gluten-free baking company based in Johnstown, Colo., for approximately $205 million (including a performance-based contingent payment of $5 million), or $175 million net of future tax benefits of approximately $30 million on a net present value basis. The acquisition, which is subject to regulatory approval and customary closing conditions, is expected to be completed later in the fourth quarter of 2018.
Canyon Bakehouse offers a line of 21 gluten-free breads, buns, bagels, English muffins, and specialty items. Almost 90% of its sales are distributed frozen through natural, specialty, grocery, and mass retailers around the country, with the remainder sold fresh. The Canyon Bakehouse brand is the top gluten-free loaf brand in natural and specialty food stores,1 the number-two brand in the overall gluten-free loaf category and the fastest-growing gluten-free bread loaf brand in the U.S.2
The company was founded by Josh and Christi Skow and Ed Miknevicius in 2009, after Christi was diagnosed with celiac disease. Canyon Bakehouse now employs 206 people and operates in a recently constructed 165,625-square-foot bakery with two production lines in Johnstown. After the transaction, Josh will continue to lead the business as president and Christi will serve as brand ambassador.
"Canyon Bakehouse is an innovative leader in a growing segment of the bakery category, which closely aligns this acquisition with our strategic goals," said Allen Shiver, Flowers' president and chief executive officer. "They have great products, a talented team of employees, a state-of-the-art gluten-free bakery, and a brand with an enthusiastic fan following. We see opportunities to leverage Flowers Foods' distribution network and retail partnerships to drive growth by bringing Canyon Bakehouse products to more consumers across the country. We look forward to welcoming Josh, Christi and the rest of Canyon Bakehouse's employees to the Flowers team."
Canyon Bakehouse CEO and Founder Josh Skow said, "Since the beginning, the mission of Canyon Bakehouse has been to help those who have given up gluten to Love Bread Again®. We are tremendously pleased with the brand, the products and the teams that we have developed and grown over the past nine years, and we are thankful for the many partners who have helped us along the way. We are now very excited about the opportunities for our company alongside Flowers Foods. With Flowers' national reach, we will be able to bring our gluten-free products to many more consumers. Flowers shares our passion for baking and they understand what makes our company and our products unique. We look forward to joining the Flowers Foods family."
Canyon Bakehouse has generated a compound annual net sales growth rate of approximately 45% since 2014. According to IRI and SPINS data, the gluten-free packaged bread category has grown at a compound annual growth rate of 6.6% per year since 2015, outperforming the broader $14.5 billion U.S. retail baked goods market.3 The company has anticipated 2019 sales of approximately $70 million to $80 million.
Flowers plans to fund the transaction with cash on-hand and existing credit facilities. The company anticipates the transaction will be accretive to fiscal 2020 earnings.
Flowers Foods' financial advisor is Deutsche Bank, and Jones Day is the company's legal counsel. Canyon Bakehouse is represented by financial advisor Integris Partners and Brownstein Hyatt Farber Schreck, LLP as legal counsel.
1SPINS Natural and Specialty Outlet Gluten Free Loaf Bread for 52 Weeks Ending 10-07-18
2IRI Custom Database MultiOutlet + SPINS Natural and Specialty Gluten Free Loaf Bread for 12 Weeks Ending 10-07-18
3IRI Custom Database MultiOutlet Gluten Free Fresh Packaged Bread for Fiscal Year 2015 vs 52 Week Ending 10-07-18 and SPINS Database for Fiscal Year 2015 vs 52 Week Ending 10-07-18
About Flowers Foods
Headquartered in Thomasville, Ga., Flowers Foods, Inc. (FLO) is one of the largest producers of fresh packaged bakery foods in the United States with 2017 sales of $3.9 billion. Flowers operates bakeries across the country that produce a wide range of bakery products. Among the company's top brands are Nature's Own, Wonder, Dave's Killer Bread, and Tastykake. Learn more at www.flowersfoods.com.
Statements contained in this press release that are not historical facts are forward-looking statements. Forward-looking statements relate to current expectations regarding the timing of completion of the proposed acquisition, the expected benefits of the proposed acquisition and management's plans, projections and objectives for our future financial condition, performance and results of operations, planned capital expenditures, long-term objectives of management, supply and demand, pricing trends and market forces, and integration plans and are often identified by the use of words and phrases such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "should," "will," "would," "is likely to," "is expected to" or "will continue," or the negative of these terms or other comparable terminology. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected. Other factors that may cause actual results to differ from the forward-looking statements contained in this release and that may affect the company's prospects in general include, but are not limited to, (a) our ability to consummate the acquisition on the terms or timeline currently contemplated, or at all; (b) the ability to successfully integrate Canyon Bakehouse's operations into our existing operations and the diversion of management's attention from ongoing business and regular business responsibilities to effect such integration; (c) the effects of increased expenses or unanticipated liabilities incurred as a result of or due to activities related to, the acquisition; (d) the risk that the anticipated cost savings, synergies, revenue enhancement strategies and other benefits from the acquisition may not be fully realized or may take longer to realize than expected or that our actual integration costs may exceed our estimates; (e) general economic and business conditions and the competitive conditions in the baked foods industry, including promotional and price competition, (f) changes in consumer demand for our products, including changes in consumer behavior, trends and preferences, including health and whole grain trends, and the movement toward more inexpensive store-branded products, (g) the success of productivity improvements and new product introductions, (h) a significant reduction in business with any of our major customers including a reduction from adverse developments in any of our customer's business, including as a result of product recalls or safety concerns related to our products, (i) fluctuations in commodity pricing, (j) energy and raw material costs and availability and hedging and counterparty risk, (k) our ability to fully integrate recent acquisitions into our business, (l) our ability to achieve cash flow from capital expenditures and acquisitions and the availability of new acquisitions that build shareholder value, (m) our ability to successfully implement our business strategies, including those strategies the company has initiated under Project Centennial, which may involve, among other things, the integration of recent acquisitions or the acquisition or disposition of assets at presently targeted values, the deployment of new systems and technology and an enhanced organizational structure, (n) consolidation within the baking industry and related industries, (o) disruptions in our direct-store delivery system, including litigation or an adverse ruling from a court or regulatory or government body that could affect the independent contractor classification of our independent distributors, (p) increasing legal complexity and legal proceedings that we are or may become subject to, (q) product recalls or safety concerns related to our products, and (r) the failure of our information technology systems to perform adequately, including any interruptions, intrusions or security breaches of such systems. The foregoing list of important factors does not include all such factors, nor necessarily present them in order of importance. In addition, you should consult other public disclosures made by the company, including the risk factors included in our most recently filed Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission ("SEC") and disclosures made in other filings with the SEC and company press releases, for other factors that may cause actual results to differ materially from those projected by the company. We caution you not to place undue reliance on forward-looking statements, as they speak only as of the date made and are inherently uncertain. The company undertakes no obligation to publicly revise or update such statements, except as required by law.