Food Business News - June 19, 2012 - 26

Smart Balance to buy gluten-free baker for $125 million
Mintel said there were

Acquisition expected to accelerate company growth rate

PARAMUS N J PARAMUS, N.J. — Smart Balance, Inc. S t B l I has signed an agreement to acquire Udi’s Healthy Foods, L.L.C. for $125 million. Smart Balance will acquire Udi’s from majority shareholder Hubson Acquisition, L.L.C., an afﬁliate of E&A Industries, the family of founder Udi Baron and other minority holders. The acquisition, as well as a reﬁnancing of existing outstanding debt, will be ﬁnanced with the proceeds of a new $280 million senior secured credit facility that includes a $40 million revolving credit facility, Smart Balance said. The transaction is expected to close in July. “The acquisition will be truly transformational for Smart Balance as it does three things for the company: It diversiﬁes our portfolio of health and wellness toward faster growing natural brands; it positions us

as a leader in gluten-free, one of the fastestgrowing categories of food today; and it accelerates our growth,” said Stephen Hughes, chairman and chief executive ofﬁcer of Smart Balance, in a June 1 conference call with ﬁnancial analysts. “The Udi’s brand not only complements our corporate vision, it also is complementary to our current gluten-free brand — Glutino. Glutino is a leading brand of snacks in grocery, and Udi’s is a leading brand in bread and baked goods, with very little overlap between the two portfolios.” Mr. Hughes said the acquisition will accelerate Smart Balance’s growth rate and diversify the company’s product mix toward natural brands. Currently, 83% of Udi’s gross sales come from gluten-free bread and other bakery products, such as cookies, buns and mufﬁns. The company’s top two s.k.u.s

account for about 40% of sales, and the top 10 s.k.u.s account for approximately 75%, Mr. Hughes said. Udi’s Healthy Foods sales have grown from $4.3 million in 2009 to an annualized run-rate of $72.4 million in sales, based on the results for the ﬁrst quarter of 2012, he noted. Mr. Hughes also said the location of Udi’s in Denver is “a perfect complement” to Smart Balance’s Montreal facility. “Ultimately, we expect to produce both brands in both facilities to minimize outbound freight expense,” he said. “At close, we’ll have two advanced, large, devoted, gluten-free manufacturing facilities in North America.” Following the acquisition, Smart Balance said “natural” brands will account for 48% of pro forma estimated net sales, up from 35% prior to the addition of Udi’s and up from 8% in 2009. “With this transaction we truly develop into a natural food growth company that we set out to create when we started the company ﬁve years ago,” Mr. Hughes said. Smart Balance is based in New Jersey and produces spreads as well as gluten-free products through its Glutino brand. Glutino was acquired in August 2011 as part of Smart Balance’s $66.3 million purchase of Importations DE-RO-MA from Claridge, a Montreal-based investment ﬁrm. Glutino, which had sales of $53.9 million in the ﬁscal year ended March 31, 2011, makes glutenfree snack foods, frozen baked goods, frozen entrees and baking mixes. FBN

Annie’s off to strong start
Adjusted income rises 37% in ﬁscal ’12
BERKELEY, CALIF. — Natural and organic food company Annie’s, Inc. recorded strong growth during its ﬁrst reporting period as a public company. Net income in the ﬁscal year ended March 31 was $9,589,000, equal to 62c per share on the common stock, down from $20,155,000, or $1.29 per share, in ﬁscal 2011. The decline primarily reﬂected an $11.3 million reversal of a valuation allowance on deferred tax assets in ﬁscal 2011. Adjusted income in ﬁscal 2012 totaled $12,102,000, up 37% from $8,860,000. Net sales in ﬁscal 2012 were $141,304,000, up 20% from $117,616,000. In a June 6 conference call with analysts, John Foraker, chief executive ofﬁcer, discussed innovation as a core element of Annie’s growth strategy, speciﬁcally mentioning the company’s largest innovation to date, which is called Frannie, short for Frozen Annie’s. “During the fourth quarter we successfully introduced our ﬁrst frozen products, a line of certiﬁed organic rising crust pizza, into national distribution with a leading natural retailer,” Mr. Foraker said. “We are excited by the initial product performance. Trial and repeat look very solid. In March, we announced the launch of our madewith-organic line of rising crust pizzas into broader natural, grocery, and mass retailers beginning later this summer.” Looking ahead to ﬁscal 2013, Mr. Foraker said Annie’s expects net sales growth in the range of 16% to 19% and adjusted net income in the range of $14 million to $14.5 million, which would represent yearover-year growth of 20% to 25%, excluding $500,000 in one-time tax beneﬁt taken in ﬁscal 2012. FBN

FOODBUSINESS NEWS

June 19, 2012

Food Business News - June 19, 2012

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