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United Natural Closes Tony's Fine Foods Acquisition

Zacks Equity Research

Specialty foods distributor United Natural Foods, Inc. (UNFI) has completed the acquisition of all of the stock of Tony’s Fine Foods, a specialty distributor of perishable food products, for $195.3 million. Tony’s Fine Foods is now a wholly-owned subsidiary of United Natural and will continue to operate as Tony’s Fine Foods.

The deal, announced in May, was financed through approximately $187.8 million in cash and approximately 112,000 shares of the company’s stock. Tony’s will use a portion of the proceeds to pay off its existing debt. The transaction is expected to be accretive to earnings in fiscal year 2015.

Tony’s Fine Foods was founded in 1934 by the Ingoglia family and distributes a wide array of specialty protein, cheese, deli, food service and bakery goods. Thus, the deal is a strategic fit for United Natural, which is looking to enhance its position and increase its market share in the specialty products industry.

United Natural can now expand its products in the markets of Western United States, as well as Alaska and Hawaii, where Tony’s Fine Foods has a presence. On the other hand, Tony’s Fine Foods has the benefit to expand its product portfolio using the company’s strong distribution network.

United Natural has taken the inorganic route to expand its distribution network, customer base and boost long-term growth. The company acquired Trudeau Foods during first quarter fiscal 2014, which helped it to enhance its position and increase its market share in the specialty products industry.

The acquisition also helped United Natural to expand its products in the markets of Minnesota, North Dakota, Wisconsin and Michigan’s Upper Peninsula. We expect the company’s acquisition of Tony’s Fine Foods to broaden its reach across all of its markets.

Like United Natural, its peer TreeHouse Foods, Inc. (THS) has been on an acquisition spree and has acquired six food companies in the last four years to expand into new categories and markets. The most recent acquisition was that of Protenergy Natural Foods which was completed on May 30. Last month, TreeHouse agreed to acquire Flagstone Foods for $860 million in cash.

United Natural currently holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the food industry are Hain Celestial Group, Inc. (HAIN) and BRF S.A. (BRFS). While Hain Celestial sports a Zacks Rank #1 (Strong Buy), BRF S.A. holds a Zacks Rank #2 (Buy).

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Read the Full Research Report on THS


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