Hershey’s targets snacks with US$1.6 billion Amplify deal

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19 Dec 2017 --- Hershey’s has signed an agreement to acquire Amplify Snack Brands, the company behind SkinnyPop popcorn, in a move which shows how big US food firms are diversifying focus to better cater for American consumers’ growing preference for healthier options. Both companies have jointly announced that they have entered into a definitive agreement under which Hershey will acquire all outstanding shares of Amplify for US$12.00 per share in cash.

The deal, valued at approximately US$1.6 billion, will strengthen Hershey's position in the snacking aisle and broadens its portfolio of innovative savory snacking brands, according to the chocolate giant. It is expected to drive significant shareholder value through growth and margin expansion as well as identified cost synergies.
 
“The acquisition of Amplify and its product portfolio is an important step in our journey to becoming an innovative snacking powerhouse as together it will enable us to bring scale and category management capabilities to a key sub-segment of the warehouse snack aisle,” said Michele Buck, The Hershey Company President and Chief Executive Officer.
 
“Hershey's snack mix and meat snacks products, combined with Amplify's Skinny Pop, Tyrrells, Oatmega, Paqui and other international brands, will allow us to capture more consumer snacking occasions by creating a broader portfolio of brands.” 
 
Annual run-rate synergies of approximately US$20 million are expected to be generated over the next two years from cost savings and portfolio optimization, says Hershey’s.
 
Since being established just over three years ago in 2014, Amplify Snack Brands’ goal has been to bring transparency to our products, and clean ingredients and great tasting snacks to consumers, says its presents and CEO, Tom Ennis.
 
“This transaction is a continuation of our mission as Hershey also believes in bringing to consumers great-tasting snacks made with the best ingredients possible. Hershey is a great cultural partner for Amplify and I'm excited for our team who will have access to Hershey's marketing and go-to-market resources to take our brands to the next level.”
 
Better-for-you products
Click to EnlargeThis strategic acquisition is expected to be accretive to Hershey's financial targets given the growth trajectory and margin structure of Amplify's key products. Amplify'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.
 
Additionally, this combination brings customers a known brand building partner that invests in category management solutions to drive higher levels of conversion and velocity at retail.
 
Other Amplify brands include PAQUI, non GMO-verified flavored tortilla chips and Oatmega grass-fed whey protein bars.
 
Under the terms of the agreement between Hershey and Amplify, Hershey has agreed to acquire all of the outstanding shares of Amplify Snack Brands, Inc. for US$12.00 per share, in a transaction structured as a tender offer followed by a merger, valued at approximately US$1.6 billion, including net debt and including a make-whole payment of US$76 million related to the Tax Receivable Agreement.
 
Based on previously announced guidance, this represents a multiple of approximately 14.8-times 2017 Adjusted EBITDA including identified annual run-rate synergies of approximately US$20 million expected to be generated over 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. Hershey 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. The acquisition is not expected to affect the previously announced full-year 2017 outlooks provided in Hershey's and Amplify's third quarter earnings release and conference calls.
 
The agreement has also been approved by the Boards of Directors of both companies.
 
Affiliates of TA Associates, Amplify's largest stockholder, and key Amplify insiders, who collectively represent approximately 57 percent of the outstanding shares, have agreed to tender their shares in the transaction.
 
The transaction is subject to Amplify's stockholders tendering a majority of Amplify's outstanding shares on a fully diluted basis prior to the expiration of the tender offer, certain regulatory approvals and other customary conditions, and is expected to close in the first quarter of 2018.

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