Milling & Baking News - August 24, 2010 - 14

Business 

approval of its stockholders," Lance said.
Under the standstill agreement, the
Warehimes for three years will not acquire additional shares of the companies common stock (except exercising
stock options and dividend reinvestment); will not sell their shares; and
will not take steps to alter the agreed
upon governance structure, including
a plan to reduce the number of directors over time.
"The standstill agreement further
provides that at no time may the Warehimes' aggregate beneficial ownership
exceed 30% of the issued and outstanding shares of the combined company's common stock," Lance said.
The proxy contains 25 reasons Lance
believes the merger was worth pursuing, including:
The expectation the merger will
create a stronger national snack food
company that is well positioned to
compete in an increasingly competitive industry by combining Lance's
and
Snyder's
complementary
strengths, resulting in a wide range of
established brands and products, expanded national direct-store delivery
system, broader geographical sales
footprint and greater sales and marketing impact;
A conclusion by the Lance board
that a larger company would be better able to weather difficult macroeconomic conditions;
Anticipated synergies, including incremental revenues and a wide
range of savings;
Cross selling opportunities on
current distribution routes;

Access to greater resources to allow investment for future growth;
The competitive climate of the industry, including the potential for further consolidation; and
The prospect for the combined
company to benefit from a "highly
experienced management team" with
extensive management experience.
Many of the other reasons cited by Lance were related to actual
terms of the merger agreement,
which management described as favorable for Lance stockholders and
"consistent with market practice for
mergers of this type."
In its list of reasons to merge with
Lance, Snyder's offered several related to what it expects will be a stronger
combined company in the marketplace as well as a number of financial
benefits. The list included:
* "The ability to invest in 'betterfor-you' new products that meet
the changing desires and lifestyle
of consumers," the proxy said;

Upward trek for Snyder's profits
interrupted in fiscal 2011
CHARLOTTE, N.C. - After rising steadily the previous four years, net income of
Snyder's of Hanover was weaker in the
first quarter of fiscal 2011 versus the same
period a year earlier.
As part of the merger proxy filed with
the Securities and Exchange Commission, financial results for privately-held
Snyder's were included. The Hanover,
Pa.-based snack maker had net income
of $5,547,000 in the 12 weeks ended June
20, down 7% from $5,940,000 a year earlier. Net sales were $159,753,000, up 3.2%
from $154,737,000.
In fiscal 2010, year ended March 28,
net income was $25,827,000, up 15% from
$22,508,000. Sales were $677,675,000, virtually unchanged from $673,083,000.
The company's growth in recent years
14 / August 24, 2010 Milling & Baking News

has been bolstered by acquisitions, including Jays Foods/Select Snacks, acquired in December 2007; Grande Foods,
acquired in April 2007; and an 80% stake
in Michaud Distributors, Inc., acquired in
October 2006.
Commenting on fiscal 2010 results,
Snyder's said its Grande and Krunchers!
Brands did well in new markets while
pretzels sold well in the grocery channel.
The 15% increase in net income was
achieved despite 2010 charges of $5.8 million for a pending litigation settlement
and $2.9 million of fees paid as part of
a failed attempt to acquire a snack company in 2009.
"Favorable commodity prices throughout most of the fiscal year, lower fuel
surcharges, higher utilization of Snyder's

* The potential to boost advertising
spending, improve and expand the
D.S.D. system;
* A wider product offering for retailers;
*"Ability to challenge and compete on a more equal footing with
global food companies that dominate both the salty snack category
and the cookie and cracker category," the proxy said;
*Greater access to financial markets;
*Liquidity for Snyder's shareholders and the expectation that the merger will be a tax-free transaction.
While neither Snyder's nor Lance
normally release to the public forecasts of financial results, data for each

Pro-forma financial
forecasts
Lance
Net revenue
Adjusted EBITDA
Adjusted EBIT

in millions
2010 2011 2012
$980 $1,000 $1,050
106
109
116
66
69
76

Snyder's
Net revenue
Adjusted EBITDA
Adjusted EBIT

2010
$738
71
52

2011
$806
81
62

2012
$872
93
74

company going forward were included in the proxy (See spreadsheet).
A detailed timeline of leading
to the merger agreement may be
found at www.bakingbusiness.com/
SnyderTimeline. MBN

manufacturing plants, as well as improved
direct-store delivery execution, helped to
offset these costs and drive higher profitability," the proxy said.
Reviewing accomplishments in fiscal
2010, Snyder's noted that market penetration of the company's pretzels in U.S.
supermarkets topped 40%; the company
developed renewable, plant-based packaging; and products in the Snyder's Natural's line were relaunched.
Gross margin in fiscal 2010 widened to
33.6% in fiscal 2010, up from 32% a year
earlier but in line with 33.1% in fiscal 2008.
The better margins this year were attributed to stepped-up pretzel production at Hanover, and increased efficiencies on Grande and Krunchers! products at the Jeffersonville, Ind., plant;
improved production efficiencies at the
Goodyear and Jeffersonville plants; and
elimination of unprofitable business at
the Jeffersonville plant. MBN
bakingbusiness.com / world-grain.com
http://www.bakingbusiness.com/ http://www.bakingbusiness.com http://www.world-grain.com
Milling & Baking News - August 24, 2010

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