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B&G Foods Plans to Acquire ACH’s Spices and Seasoning Business

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Price movement

B&G Foods (BGS) rose 5.9% to close at $50.33 per share during the third week of September 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 5.9%, 6.6%, and 46.8%, respectively, as of September 23, 2016.

BGS is trading 6.2% above its 20-day moving average, 4.9% above its 50-day moving average, and 24.9% above its 200-day moving average.

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Related ETF and peers

The Guggenheim Multi-Asset Income ETF (CVY) invests 0.35% of its holdings in B&G Foods. The ETF tracks the Zacks Multi-Asset Income Index. The index aims to outperform the Dow Jones US Select Dividend Index using US stocks, ADRs (American depositary receipts), REITs, MLPs, CEFs (closed-end funds), preferred stocks, and royalty trusts. The YTD price movement of CVY was 9.2% on September 23, 2016.

The market caps of BGS’s competitors are as follows:

  • General Mills (GIS): $39.0 billion
  • JM Smucker (SJM): $16.1 billion
  • TreeHouse Foods (THS): $5.0 billion

Latest news on B&G Foods

B&G Foods has entered into an agreement to acquire ACH Food’s spices and seasoning business, which includes Spice Islands, Tone’s, and Durkee brands. It also includes Weber brand sauces and seasonings and the manufacturing facility in Ankeny, lowa. The price of the deal is $365 million in cash, subject to a post-closing inventory adjustment. The acquisition is expected to close in 4Q16.

Moody’s said on September 21, 2016, that “B&G Foods, Inc.’s (BGS) planned acquisition of the spices and seasonings business of ACH Food Companies, Inc. (ACH) is a credit positive, but it does not affect the company’s B1 Corporate Family Rating (CFR) or stable rating outlook.”

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Performance of B&G Foods in 2Q16

B&G Foods saw 2Q16 reported net sales of $306.4 million, which represents a rise of 58.3% compared to $193.6 million in 2Q15. The company’s gross profit margin and operating income rose 11.8% and 67.3%, respectively, in 2Q16 over 2Q15. It reported impairment of intangible assets of $5.4 million in 2Q16.

Its net income and EPS (earnings per share) rose to $30.3 million and $0.48, respectively, in 2Q16 compared to $18.7 million and $0.33, respectively, in 2Q15. It reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) and adjusted EPS of $85.0 million and $0.57, respectively, in fiscal 2Q16, which represent rises of 79.3% and 67.7%, respectively, over 2Q15.

BGS’s inventories fell 16.0%, and its trade accounts receivable rose 2.2% in 2Q16 over 4Q15. It reported cash and cash equivalents of $107.6 million in 2Q16 compared to $5.2 million in 4Q15. Its current ratio rose to 4.9x, and its debt-to-equity ratio fell to 3.1x in 2Q16 compared to 3.4x and 4.6x, respectively, in 4Q15.

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Quarterly dividend

B&G Foods has declared a regular quarterly cash dividend of $0.42 per share on its common stock. The dividend will be paid on October 31, 2016, to shareholders of record as of September 30, 2016.

Projections

The company has made the following projections for 2016:

  • net sales of $1.39 billion–$1.42 billion
  • adjusted EBITDA of $317 million–$327 million
  • adjusted EPS of $2.11–$2.21

Next, we’ll take a close look at Mondelēz International (MDLZ).

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