Provides Entry into Attractive, Adjacent
Wafer and Sugar-Free Cookie Categories with Better-For-You Product
Characteristics
Leverages Hostess’ Proven Business Model
with Opportunity to Expand Voortman’s Complementary and Market
Leading Brands
Strategic Transaction Expects to Generate at
least $15 million of Annual Run-rate Synergies and Double-Digit EPS
Accretion by 2021
Management Will Host Conference Call Today
at 8:30 a.m. ET
Hostess Brands, Inc. (NASDAQ: TWNK, TWNKW) (“Hostess” or the
“Company”), and Voortman Cookies Limited (“Voortman”) today
announced that they have executed an agreement under which Hostess
will acquire Voortman, a leading and rapidly growing manufacturer
of premium, branded wafers as well as sugar-free and specialty
cookies, from Swander Pace Capital for approximately $320 million
(C$425 million) in cash, including a customary working capital
adjustment, representing a post-synergy 9.1x1 EBITDA transaction
multiple. The transaction has been unanimously approved by the
Hostess board of directors. Hostess expects to close the
transaction in early January 2020, subject to customary closing
conditions.
“Voortman is a leading brand with a well-defined consumer
position that complements and extends the growing Hostess portfolio
into the growing cookie and better-for-you sweet snacking
categories with meaningful runway for future growth,” commented
Andy Callahan, Hostess’ President and Chief Executive Officer. “We
believe the acquisition of Voortman will create significant value
for all of our stakeholders. We expect the combination of Hostess’
lean, proven operating model and Voortman’s brand and adjacent
category position, will result in meaningful cost savings and
growth opportunities. This acquisition fits well into our long-term
growth strategy and we are confident that Voortman will be a great
addition to our existing sweet baked goods snacking and breakfast
portfolio.”
“The team at Voortman is excited about becoming part of the
Hostess portfolio and the prospects for further dramatic growth of
the Voortman brand behind the exceptional capabilities of the
Hostess organization,” commented Douglas MacFarlane, CEO of
Voortman.
Voortman is the #1 player in crème wafers and sugar free
cookies, as reported by Nielsen for the 52-week period ended
November 2, 2019 and has achieved compound annual point of sale
growth over the last three years of approximately 5%. Founded in
1951 by brothers William and Harry Voortman and headquartered in
Burlington, Ontario, Canada, Voortman is a leading manufacturer of
premium, branded wafers as well as sugar-free and specialty cookies
with distribution mainly in the United States and Canada.
Voortman’s product ingredients, flavor profiles and better-for-you
characteristics complement Hostess’ sweet baked goods snacking
business.
Compelling Strategic and Financial Benefits
The transaction will create a larger and more diversified sweet
snacking company. Hostess believes the combination will provide the
following strategic and financial benefits:
- Diversifies and Expands Product Offerings and Manufacturing
Capabilities in Attractive, Adjacent Category: The combination
of Hostess’ existing portfolio of iconic new and classic treats
including Hostess® Cupcakes, Twinkies®, Donettes®, Ding Dongs®,
Zingers®, Danishes, Honey Buns and Coffee Cakes among others, with
the market leading Voortman brand of premium wafers and sugar free
and specialty cookies together creates a more diverse company. By
adding the Voortman brand, Hostess expects to compete with its
uniquely positioned and differentiated products in the large and
growing $8.4 billion cookie category and have greater growth
opportunities provided by a more diverse portfolio of brands and
products.
- Leverages Hostess’ Broad Customer Reach and Lean and Agile
Business Model: Complementary sales channels provide actionable
whitespace opportunities and potential to accelerate revenue growth
for Voortman by leveraging Hostess’ proven distribution and
merchandising capabilities. The combined company expects to realize
additional benefits of scale via sharing established, efficient
infrastructure and strengthening of collaborative retail
partnerships in the United States and Canada.
- Significant Cost Synergy Opportunities: Hostess expects
the transaction to deliver on key growth opportunities while
achieving at least $15 million in annual run-rate cost synergies
within 12 – 18 months. Cost synergies have been identified
primarily from leveraging the Hostess operating model including
procurement, operations, and logistics. Based on identified cost
synergies, innovation pipeline and growth trajectory, Hostess
believes there is opportunity to continue investing in the Voortman
business and expand margins that should, over time, be in the top
quartile of our peers and be accretive to Hostess margins.
- Compelling Financial Benefits: Hostess expects the
transaction to provide approximately $20 million of incremental
adjusted EBITDA in 2020, growing to $40 to $50 million by 2022.
Mid-single digit earnings per share accretion is expected in 2020
(excluding investments in integration) with double-digit accretion
thereafter, upon full achievement of cost synergies.
Transaction Details
Under the terms of the transaction agreement, Voortman will
become a wholly owned subsidiary of Hostess. The Company intends to
finance the $320 million transaction by using cash on its balance
sheet, along with secured financing commitments from Credit Suisse
and Citi. Net leverage immediately following the transaction is
expected to be approximately 4.5x and be reduced to around 4.0x by
the end of 2020. Hostess has a strong track record of reducing its
net leverage and it remains committed to deleveraging quickly via
organic growth and subsequent free cash flow generation. The
transaction is expected to close in early January 2020, subject to
customary closing conditions.
Advisors
Citi is acting as lead financial advisor, and Credit Suisse is
also serving as financial advisor to Hostess. Davies Ward Phillips
& Vineberg LLP and Morgan, Lewis & Bockius LLP are serving
as legal counsel to Hostess. Houlihan Lokey is serving as financial
advisor and Stikeman Elliott LLP is acting as legal counsel to
Swander Pace and Voortman.
Non-GAAP Financial Measures
The Company defines adjusted EBITDA as net income adjusted to
exclude (i) interest expense, net, (ii) depreciation and
amortization and (iii) income taxes, as further adjusted to
eliminate the impact of certain items that the Company does not
consider indicative of its ongoing operating performance. Adjusted
EBITDA has limitations as an analytical tool, and you should not
consider it in isolation, or as a substitute for analysis of the
Company's results as reported under GAAP. Adjusted diluted earnings
per share is Adjusted EBITDA divided by the total number of shares
of Class A common stock outstanding, on a diluted basis. Each of
adjusted EBITDA and adjusted diluted earnings per share is a
non-GAAP financial measure. Such measures are commonly used in the
Company's industry and should not be construed as an alternative to
net income or earnings per share as indicators of operating
performance (as determined in accordance with GAAP). These Non-GAAP
Financial Measures may not be comparable to similarly titled
measures reported by other companies. The Company has included
these Non-GAAP Financial Measures because it believes the measures
provide management and investors with additional information to
measure the Company's performance, estimate the Company's value and
evaluate the Company's ability to service debt. The Company
provides this forward-looking information only on a nonGAAP basis
and does not provide a reconciliation of the Company's future
financial expectations to the most directly comparable GAAP
financial measure because of the inherent difficulty in forecasting
and quantifying certain amounts that are necessary for such
reconciliation; including adjustments that could be made for
deferred taxes; remeasurement of the tax receivable agreement,
changes in allocation to the non-controlling interest,
transformation expenses and other non-operating gains or losses
reflected in the Company's reconciliation of historic non-GAAP
financial measures, the amount of which could be material.
Conference Call and Webcast
The Company will host a conference call and webcast with an
accompanying presentation today, December 2, 2019 at 8:30 a.m. EDT
to discuss the transaction. Investors interested in participating
in the live call can dial 1-877-451-6152 from the U.S. and
1-201-389-0879 internationally. A telephone replay will be
available approximately two hours after the call concludes through
Monday, December 16, 2019, by dialing 1-844-512-2921 from the U.S.,
or 1-412-317-6671 from international locations, and entering
confirmation code 13697259. The simultaneous, live webcast and
presentation will be available on the Investor Relations section of
the Company’s website at www.hostessbrands.com. The webcast will be
archived for 30 days.
About Hostess Brands, Inc.
Hostess Brands, Inc. is a leading packaged food company focused
on developing, manufacturing, marketing, selling and distributing
fresh baked sweet goods in the United States. The brand’s history
dates back to 1919, when the Hostess® CupCake was introduced to the
public, followed by Twinkies® in 1930. Today, the Company produces
a variety of new and classic treats in addition to Twinkies® and
CupCakes, including Donettes®, Ding Dongs®, Zingers®, Danishes,
Honey Buns and Coffee Cakes. For more information about Hostess®
products and Hostess Brands, please visit hostesscakes.com. Follow
Hostess on Twitter: @Hostess_Snacks; on Facebook:
facebook.com/Hostess; on Instagram: Hostess_Snacks; and on
Pinterest: pinterest.com/hostesscakes.
About Voortman Cookies Limited
Voortman was founded in 1951 by brothers William and Harry
Voortman, who emigrated to Canada from their hometown of
Hellendoorn, the Netherlands, in 1948 with their father, who had
operated a bread bakery there. Since its inception, the brand has
been dedicated to making the very best quality cookies, using the
finest, hand-selected ingredients. In 2004, Voortman Bakery was the
first North American food brand to announce the removal of trans
fats from its retail food products. Most recently, Voortman
announced its new packaging, new logo and new recipes featuring
real ingredients. In 2017, Voortman Bakery was awarded the Women's
Choice Award® based on extraordinary recommendations from their
female customers in a customer satisfaction survey conducted by
WomenCertified Inc. using the company's customer database. For more
information about Voortman Bakery, go to:
https://voortman.com/.
Forward-Looking Statements
This press release contains statements reflecting the Company's
views about its future performance that constitute “forward-looking
statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended and Section 21E of the Securities Exchange Act
of 1934, as amended, that involve substantial risks and
uncertainties. Forward-looking statements are generally identified
through the inclusion of words such as “believes,” “expects,”
“intends,” “estimates,” “projects,” “anticipates,” “will,” “plan,”
“may,” “should,” or similar language. Statements addressing the
Company's future operating performance and statements addressing
events and developments that the Company expects or anticipates
will occur are also considered as forward-looking statements. All
forward-looking statements included herein are made only as of the
date hereof. The Company undertakes no obligation to update any
forward-looking statement, whether as a result of new information,
future events, or otherwise.
These statements inherently involve risks and uncertainties that
could cause actual results to differ materially from those
anticipated in such forward-looking statements. These risks and
uncertainties include, but are not limited to, timing and
completion of the acquisition of Voortman, the Company’s ability to
integrate Voortman and achieve the expected synergies, maintaining,
extending and expanding the Company's reputation and brand image;
protecting intellectual property rights; leveraging the Company's
brand value to compete against lower-priced alternative brands;
correctly predicting, identifying and interpreting changes in
consumer preferences and demand and offering new products to meet
those changes; operating in a highly competitive industry; the
ability to maintain or add additional shelf or retail space for the
Company's products; the continued ability to produce and
successfully market products with extended shelf life; the ability
to drive revenue growth in key products or add products that are
faster-growing and more profitable; volatility in commodity,
energy, and other input prices and the ability to adjust pricing to
cover increased costs; dependence on major customers; geographic
focus could make the Company particularly vulnerable to economic
and other events and trends in North America; increased costs in
order to comply with governmental regulation; general political,
social and economic conditions; a portion of the workforce belongs
to unions and strikes or work stoppages could cause the business to
suffer; product liability claims, product recalls, or regulatory
enforcement actions; unanticipated business disruptions; dependence
on third parties for significant services; insurance may not
provide adequate levels of coverage against claims; failures,
unavailability, or disruptions of the Company's information
technology systems; the Company's ability to achieve expected
synergies and benefits and performance from the Company's strategic
acquisitions; dependence on key personnel or a highly skilled and
diverse workforce; and the Company's ability to finance
indebtedness on terms favorable to the Company; and other risks as
set forth from time to time in the Company's Securities and
Exchange Commission filings.
As a result of a number of known and unknown risks and
uncertainties, the Company's actual results or performance may be
materially different from those expressed or implied by these
forward-looking statements. Risks and uncertainties are identified
and discussed in Item 1A-Risk Factors in the Company's Annual
Report on Form 10-K for 2018. All subsequent written or oral
forward-looking statements attributable to us or persons acting on
the Company's behalf are expressly qualified in their entirety by
these risk factors. The Company undertakes no obligation to update
any forward-looking statement, whether as a result of new
information, future events, or otherwise.
1
Calculated using the 2020 estimated
Earnings Before Interest, Taxes, Depreciation and Amortization
(“EBITDA”) of $20 million + run-rate synergy estimates of $15
million = $35M EBITDA and a transaction price of $320 million.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191202005292/en/
Investors, please contact: Katie Turner ICR 646-277-1228
katie.turner@icrinc.com
Media, please contact: Hannah Arnold LAK Public Relations, Inc.
212-329-1417 harnold@lakpr.com or Marie Espinel LAK Public
Relations, Inc. 212-899-4744 mespinel@lakpr.com
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