Shearer’s Foods, L.L.C. has finalized its purchase of the Private Brands business of Charlotte, N.C.-based Snyder’s-Lance, Inc. for $430 million. The transaction, which first was announced on May 7, also includes two manufacturing facilities in the United States and Canada.
Snyder’s-Lance said the sale of the Private Brands business coupled with the recently completed acquisition of Baptista’s Bakery will reduce annual revenues by approximately $250 million and result in an initial reduction in operating margins of about 20 basis points primarily due to stranded costs.
“This is an important step forward for Snyder’s-Lance as we dedicate our attention to our branded portfolio,” said Carl E. Lee Jr., president and chief executive officer of Snyder’s-Lance. “I want to thank all of our associates who have worked to make our Private Brands successful for many years and wish everyone the greatest of success in the future.”
Snyder’s-Lance said that exiting private brands and acquiring the “better-for-you” product capabilities of Baptista’s demonstrates the company’s execution of its strategic plan to become “a differentiated branded company focused on consumer trends and demand.”
The transactions are expected to allow Snyder’s-Lance to focus on its branded products by placing more resources to work on growth categories such as “better-for-you” and premium snacks. The growth categories will benefit from incremental new product innovation, category development and marketing investments, the company said.
In addition to completing the sale of its Private Brands business, Snyder’s-Lance said it has begun implementing a margin improvement and restructuring plan to offset stranded costs that remain after the sale of Private Brands.
“This plan is designed to scale the company’s operations appropriately with focus on branded products as well as the D.S.D. and direct sales networks,” Snyder’s-Lance said. “Snyder’s-Lance has increased its operating margin run rate by 140 basis points over the past 24 months and is moving quickly to attack these stranded costs while working to further expand margins. Savings are expected to come from a combination of operational initiatives and headcount reductions.”
The company said annualized cost reductions are anticipated to be in the range of $22 million to $25 million, 125 to 150 basis points, and will be realized progressively over the next 12 months starting in the third quarter.
“This is a major initiative for the company to ensure its cost base is managed aggressively,” Snyder’s-Lance said. The company plans to unveil more details and specific goals during its second-quarter 2014 earnings call in early August.
