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LNCE's New Buy to Boost Portfolio

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Snyder's-Lance, Inc. recently announced that it has signed a definitive agreement to take over the Princeton, New Jersey-based company Snack Factory, including its premium cracker product, Pretzel Crisps. According to the agreement, Snyder's-Lance will be paying $340 million in cash for the acquisition.

The transaction will add Snack Factory’s popular brand Pretzel Crisps, which is the world’s first pretzel-shaped low calorie cracker, to Snyder's-Lance portfolio. The deal corresponds well with Snyder's-Lance’s growth strategy of building a portfolio of premium and differentiated core brands.

Snyder's-Lance currently owns three core brands; Snyder's of Hanover Pretzels, Lance Sandwich Crackers, and Cape Cod Potato Chips. Pretzel Crisps will become the fourth core brand of Snyder's-Lance. The deal will also introduce the snack food company to the fast growing deli-bakery section of grocery stores, where Pretzel Crisps has captured a significant share.

Pretzel Crisps is a premium snack that is baked and made from natural ingredients. It carries only 110 calories per serving and is available in Original, Garlic and Parmesan, Everything and Sesame flavors.

The transaction is expected to close in the earlier part of the fourth quarter. It will be accretive to Snyder's-Lance’s 2012 earnings by 2 cents and to 2013 earnings by 10 cents. Moreover, it will boost Snyder's-Lance’s 2013 revenue by $160 million. The purchase consideration includes about $60 million of net present value of future tax benefits. The closing of the deal is subject to regulatory approvals.

Our Recommendation

We currently have a Neutral recommendation on Snyder's-Lance. The stock carries a Zacks #3 Rank (a short-term ‘Hold’ rating).

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