SunOpta Acquires Niagara Natural for $7 Million, Reports Weak Earnings
13 Aug 2015 --- SunOpta Inc. has signed a definitive agreement to acquire the assets of Niagara Natural Fruit Snack Company Inc. The acquisition closed contemporaneously with the execution of the definitive agreement. The news came as SunOpta reported revenues of $307.3 million versus $327.6 million in the prior year, a 6.2% decrease on a consolidated basis and a 5.0% decrease within SunOpta Foods.
Excluding the effect of changes including commodity prices, foreign exchange rates, and product rationalizations, revenues decreased 3.2% on a consolidated basis and 2.2% within SunOpta Foods. Operating income of $9.7 million, or 3.2% of revenues, versus $16.7 million, or 5.1% of revenues, in the prior year.
Niagara Natural is a growing and innovative manufacturer of healthy non-GMO and organic fruit snacks, enhancing SunOpta's existing healthy snack platform and focus on integrated consumer products. With the acquisition, SunOpta extends its market presence in fruit snacks and importantly will now have manufacturing operations in both the east and west, providing a competitively positioned platform to improve customer service and also generate meaningful operational and logistical synergies. The acquisition is expected to be immediately accretive to cash flows, and accretive in 2016 to earnings on a GAAP basis.
"Niagara Natural is a strong strategic fit within our core vertically integrated consumer products strategy, aligning well with our focus on healthy and convenient snacking," said Rik Jacobs, President and Chief Operating Officer of SunOpta. "Not only are we adding a growing business that enhances our leadership position in this on-trend category, but we are adding a talented team with operational expertise and a customer base comprised of high-quality, blue chip retailers."
Based in the Niagara Region in Ontario, Canada, Niagara Natural is expected to generate approximately CDN $10 million in revenue in 2015, and has approximately 35 employees, all of whom are expected to join SunOpta. John Boot, who founded Niagara Natural in 2009 and serves as its President, will lead SunOpta's combined fruit snack category. The transaction is valued at approximately US $6.7 million on a debt free basis, plus potential future payments based on specific performance targets, and is subject to certain post-closing adjustments. The purchase will be funded through cash on hand and existing credit facilities.
"Joining SunOpta allows us to leverage their global platform and combine our innovation pipelines, which should enable us to reach new customers and offer existing customers enhanced capabilities," said Boot. "Combining our existing fruit snack platform creates a strong market leader in the growing fruit snack category, and I am excited we will be joining the SunOpta team."
"We see product innovation opportunities in healthy and organic packaged fruit snacks, but also in fruit-based ingredients and new products focused on main stream snacking," said Steve Bromley, Chief Executive Officer of SunOpta. "Our ongoing investment in new product development plays a key role in our growth strategy, and the fruit snack category is a great example of a category where we intend to provide innovative products for existing and new customers."
"We continue to be pleased with the performance of the Global Ingredients segment. Despite a significant decline in the euro, and product rationalization in the sunflower category, the Global Ingredients segment reported increased sales and continued margin enhancement. The growth, particularly in organic ingredients, is a testament to the underlying strength of the market for specialty and organic foods," said Rik Jacobs, President and Chief Operating Officer of SunOpta Inc. "We are not pleased with the shortfall in the Consumer Products segment. However, we believe that the initiatives we have in place will restore top and bottom line growth which will accelerate as we head into 2016. In the healthy beverage category, our aseptic and juice plants are now filling up based on the pipeline we have developed with new customers and new products. And, while we have been challenged in IQF fruit, with the pending transformative acquisition of Sunrise Growers we expect to be the leader in the healthy frozen fruit category. In addition, the acquisition of Niagara Natural, which we announced today in the healthy snack category, is expected to give us the critical mass to accelerate our growth in fruit snacks."
