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B&G Foods’s Upcoming Acquisition of Green Giant and Le Sueur

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Details of the acquisition

B&G Foods (BGS) announced on September 3 that it has entered into an agreement to acquire the iconic frozen and canned vegetable brands Green Giant and Le Sueur from General Mills (GIS) for ~$765 million in cash. B&G Foods expects the acquisition to close during the fourth quarter of 2015, subject to regulatory approvals.

The company’s CEO, Robert C. Cantwell, commented, “We are thrilled to welcome Green Giant and Le Sueur to the B&G Foods family of brands. For over 100 years, Green Giant and Le Sueur have been providing consumers with great-tasting, nutritious vegetables picked at the peak of perfection. We look forward to building on that rich history by offering new and innovative products that will respond to the needs of today’s health-conscious consumer.”

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Benefits of the acquisition

Management expects the acquisition to be immediately advantageous to the company’s EPS (earnings per share) and free cash flow. This is consistent with the company’s acquisition strategies. Also, the acquisition marks the company’s entry into the frozen food category, which the company believes will open many future growth opportunities.

The company projects that following a six- to 12-month transition period, the Green Giant and Le Sueur brands will generate on an annualized basis net sales of ~$550 million, adjusted EBITDA of ~$95–$100 million, and EPS of $0.60. B&G Foods expects to see ~$137 million in tax benefits, as the acquisition will be structured as an asset purchase.

The company intends to fund the acquisition and related fees and expenses with additional revolving loans and new incremental term loans under its existing credit facility. It has received financing commitments from financial institutions such as Barclays, Merrill Lynch, and RBC Capital Markets. Barclays and RBC Capital Markets acted as financial advisors to B&G Foods.

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Other acquisitions since 2Q15

At the beginning of the third quarter, B&G Foods acquired Spartan Foods of America, including the Mama Mary’s brand, from Linsalata Capital Partners and other sellers for ~$50 million in cash. The acquisition was consistent with the company’s long-standing strategy of acquiring brands with strong category positioning.

The company expects that after being fully integrated into B&G Foods, the Mama Mary’s brand will generate on an annualized basis net sales of ~$35 million and adjusted EBITDA of ~$7.5 million. We’ll see the effect of the acquisition in the company’s upcoming 3Q15 results.

B&G Foods’s competitor Archer Daniels Midland (ADM) reported a -12.1% YTD (year-to-date) return. However, Campbell’s Soup (CPB) and ConAgra Foods (CAG) reported YTD returns of 12.3% and 13.2%, respectively. The Guggenheim S&P Equal Weight Consumer Staples ETF (RHS) invests 3.0% of its holdings in the CAG stock.

You can find out how the company performed in 3Q15 in our post-earning series on B&G Foods next week.

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