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B&G Foods (BGS) Acquires ACH's Spice Business for $365M

GIS BGS MDLZ APFH

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Snack foods manufacturer B&G Foods, Inc. (BGS - Free Report) completed the acquisition of spices and seasonings business of ACH Food Companies, Inc as proposed on Sep 21, 2016. The deal is valued at approximately $365 million in cash, subject to a post-closing inventory adjustment.

B&G Foods also acquired the manufacturing facility in Ankeny, Iowa, the largest spice manufacturing facility in the world. ACH’s brands like Spice Islands, Tone’s and Durkee will now be part of B&G Foods’ portfolio.

The acquisition and related charges were funded with cash on hand, including the net proceeds of its Aug 2016 public offering of common stock and other revolving loans under B&G Foods’ existing credit facility.

The acquired business is expected to generate net sales in the range of $220 million to $225 million on annualized basis, after the acquisition is integrated. Also, adjusted EBITDA is projected in the band of $38 million to $40 million, adjusted diluted earnings per share in the range of 26 cents to 28 cents and tax benefits of $83 million  on a net present value basis.

Notably, acquisitions have been a key growth driver for B&G Foods. Total revenue of $318.2 million in the third quarter 2016 was driven by its recent acquisitions. Revenues in the third quarter increased 49.2% year over year driven by strong sales at Green Giant, which was taken over in Nov 2015. The acquisition of ACH’s spices and seasonings business is expected to prove accretive to the company’s earnings and free cash flow.

Also, the company reported adjusted earnings per share of 56 cents beat the Zacks Consensus Estimate of 52 cents by 7.7%. Earnings also increased 43.6% from the year-ago quarter on higher sales and margins.

B&G FOODS CL-A Price

 

BGS Foods currently carries a Zacks Rank #3 (Hold).    

Stocks to Consider

Better-ranked stocks in the Food-Miscellaneous industry include General Mills, Inc. (GIS - Free Report) , Mondelez International, Inc. (MDLZ - Free Report) and AdvancePierre Foods Holdings, Inc. (APFH - Free Report) .

All the three companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

General Mills is expected to see a 5.9% rise in fiscal 2017 earnings.

Mondelez is likely to witness an 11.5% increase in full-year 2016 earnings.

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