September 26, 2016

B&G Foods, whose brands include Green Giant, B&M and Ortega, announced that it is expanding its portfolio into a new category through an agreement to acquire the spice and seasoning business of ACH Food Companies Inc. for $365 million in cash. The deal will include the leading spice brands, Spice Island, Tone, and Durkee, as well as Weber sauces and seasonings which are under license, and a factory located in Arkeny, Iowa.

The acquisition will also give B&G Foods exposure to the growing spice and seasonings segment which capitalizes on consumer demands for healthy, flavorful foods without artificial ingredients, fats, or sugars.

“This acquisition will significantly broaden our position in the large and growing spices and seasonings category, which we believe is very relevant to today’s consumer, who is looking for healthier options, simple ingredients and enhanced flavor,” stated Robert C. Cantwell, President and Chief Executive Officer of B&G Foods.

Structured as an asset purchase, B&G expects the acquisition to generate net sales of between $220 million and $250 million on an annualized net basis beginning in 2017, with adjusted EBITDA of between $38 million and $40 million and adjusted diluted earnings per share of between $0.26 and $0.28. In addition, because of its structure, B&G expects the addition of the ACH Food Companies’ spice and seasonings business to produce approximately $83 million in tax benefits on a net present value basis.

The deal, which is expected to close in the fourth quarter of this year, will be funded by B&G through cash on hand, which includes the proceeds from the group’s public offering of common stock in August 2016 and revolving loans under its existing credit facility.

This deal by B&G follows little more than a year after major spice and seasonings company, McCormick & Co. announced its agreement to acquire the Italian spice company, Drogheria & Alimentari (D&A) for £62.5 million (US$96.8 million).

Prior to the deal McCormick had a strong presence in the spice and seasoning industry across Europe, the Middle East, and Africa. This acquisition will expand on that presence particularly in Europe, where D&A has a significant market share in Italy, controlling approximately 33 percent of the spice and seasoning market in that country.

The global spice seasonings and spice market is expected to see a compounded annual growth rate (CAGR) of 4.9 percent, which will drive the segment to a value of $16.13 billion by 2020.

Globalization’s effect on the integration of global diets and cuisines along with the medicinal benefits of some spices are expected to be some of the factors behind such growth, which will be most pronounced in the Asia-Pacific market where the segment will see a CAGR of seven percent between 2015 and 2020.

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Lynda Kiernan