An IPO from the fall of 2015, Amplify Snack Brands (BETR 11.93, +4.93 +70.4%) is a fairly new publicly-traded company. Given that, it didn’t take long for competition to come knocking as news out this morning that confectionery giant The Hershey Company (HSY 115.14, +1.00 +0.9%) would acquire the company for $12.00 per share sent the stock to about 13-month highs dating back to last November.
The fairly quick buyout offer comes about a month removed from BETR’s worse than expected Q3 (Sep) report and lowered full year guidance. The company missed on both the top and bottom line on November 7, despite revenue growth of about 40%. Weakness in the quarter was due mostly to an underperforming ready-to-eat popcorn performance and an increased promotional environment.
Turn then to today’s announcement of a buyout by HSY – which was detailed in a story from CNBC before the premarket session began – confirmed this morning at a valuation of about $1.6 billion, or about $12.00 per BETR share.
HSY expects the deal to be accretive to its financial targets given the growth trajectory and margin structure of BETR’s key products. BETR’s brands compete in many attractive food categories that are capitalizing on fast-growing trends in snacking with a focus on better-for-you products that deliver clean, simple and transparent ingredients as well as unique flavors and forms.
Per the terms of the agreement between HSY and BETR, HSY will to acquire all of the outstanding shares of BETR for $12.00 per share, in a transaction structured as a tender offer followed by a merger, valued at about $1.6 billion, including net debt and including a make-whole payment of $76 million related to the Tax Receivable Agreement.
Based on previously announced guidance, this represents a multiple of about 14.8-times 2017 Adjusted EBITDA including identified annual run-rate synergies of about $20 million expected to be generated during the next two years from cost savings and portfolio optimization.
The transaction will be funded with cash on hand and new debt and is not expected to impact Hershey’s current ratings. HSY then expects the transaction to be accretive to adjusted earnings per share-diluted, including transaction related non-cash amortization, in the first-year post closing with accretion increasing in year two. Adjusted earnings per share-diluted accretion in both years is substantially higher when excluding transaction related amortization. Also, the acquisition is not expected to affect the previously announced full year 2017 outlooks provided in HSY’s and BETR’s Q3 earnings release and conference calls.
Following the deal, BETR’s SkinnyPop, Tyrrells, Paqui, Oatmega, Lisa’s Chips, The Wholesome Food Company, and Thomas Chipman brands will all be owned by HSY. The deal is expected to close in 1Q2018 and represents about a 70% premium to Friday’s closing price.