Hostess Brands Diversifies Snack Lineup With Voortman Acquisition

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Hostess Brands Diversifies Snack Lineup With Voortman Acquisition

12/11/2019

KANSAS CITY, Mo. — Hostess Brands Inc. entered into an agreement to acquire Swander Pace Capital's Voortman Cookies Ltd., which will diversify the company's snack lineup as it enters into attractive, adjacent wafer and sugar-free cookie categories with better-for-you product characteristics.

The $320 million cash transaction includes a customary working capital adjustment and has been unanimously approved by the Hostess board of directors. Under terms of the deal, Voortman will become a wholly owned subsidiary of Hostess. It is expected to close 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 CEO. "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."

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. 

According to Hostess, the transaction will create a larger and more diversified sweet snacking company, and believes the combination will provide the following strategic and financial benefits:

Diversifies and expands product offerings and manufacturing capabilities in an attractive, adjacent category:

The combination of Hostess' existing portfolio of iconic new and classic treats 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 in the growing $8.4 billion cookie category and have greater growth opportunities.

Leverages Hostess’ broad customer reach and 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.

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.

Citi is acting as lead financial advisor to Hostess, and Credit Suisse is also serving as a financial advisor. 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.

Hostess Brands is a leading packaged food company focused on developing, manufacturing, marketing, selling and distributing fresh baked sweet goods in the United States.