Hostess Brands, Inc. has acquired certain U.S. assets of Aryzta LLC, including one of the company's Chicago Cloverhill bakery facilities and its Big Texas and Cloverhill brands. The transaction also includes supply partnerships with some of Hostess' key retailers. Financial terms of the transaction were not disclosed. Until June 2017, the bakery was a significant co-manufacturer to Hostess.
“This is an excellent enabling acquisition for the Hostess breakfast strategy, and fills a key strategic gap in our product portfolio,” said Dean Metropoulos, executive chairman of Hostess. “The Big Texas and Cloverhill brands and private-label partnerships will add significant strength to our growing breakfast business.”
Highlights of the transaction include the following:
• The Big Texas and Cloverhill brands distribution strength gives Hostess greater access to the club, vending, cash and carry and independent convenience stores sales channels.• It also provides for a strong breakfast partnership with several existing key retailers. •The move significantly expands the Hostess range of offerings in the sweet baked goods breakfast category that includes HoneyBuns, danish pastries and cinnamon rolls, among others. •Hostess says it expects to reduce its reliance on co-manufacturing. The 137,000 sq.-ft. bakery facility represents the largest individually-wrapped danish pastry facility in North America.
“This strategic acquisition allows us to bring important product manufacturing in-house as we expand and drive growth in our breakfast product portfolio,” noted Bill Toler, president and CEO of Hostess. “In addition, this purchase will enable Hostess to forgo in-house capital investments and create significant value over the next few years.”
The company has had a long supply relationship with Arytza for breakfast items. The positioning and consumer loyalty to the Big Texas and Cloverhill brands will broaden its participation in a number of distribution outlets, observed Andy Jacobs, Hostess COO.
The company expects short-term earnings before the deduction of interest, tax and amortization expense losses of approximately $15 million to $20 million and corresponding earnings per diluted share dilution of approximately $0.10 to $0.12 as a result of anticipated operating losses from the acquired business through the second half of 2018 as the company improves the sales and operating performance of the facility. It also expects the acquired business to be positive for EBITDA in the first half of 2019. By 2020, Hostess says it expects this business to contribute approximately $20 million to $25 million in EBITDA.