Packaged bakery foods company
) recently inked a definitive agreement to acquire Maine-based
Lepage Bakeries, Inc. The deal is valued at $370 million in cash
and stock. The transaction awaits necessary regulatory approvals
and is expected to be closed during the second quarter of fiscal
Flowers plans to fund the transaction through cash-on-hand and
credit facilities. The deal should benefit Flowers and Lepage alike
as both operate in the same vertical.
We view the deal as strategically positive for both parties,
given that Lepage Bakeries has been offered a justified valuation
for this buyout in our opinion. Also, the deal holds instant cash
value to Lepage.
Founded in 1903, Lepage Bakeries manufactures premium-quality
breads, rolls and donuts, catering to customers throughout the
Northeast U.S. under the Country Kitchen and Barowsky's brands. In
fact, Lepage has a strong branded market share. Barowsky's organic
brand can also make an entry to Flowers Foods' current Southern
The deal should extend Flowers' reach to New England and the New
York area, adding around 18 million consumers to its present base
ands thus facilitating its growth. Not only this, the deal will add
three well-organized bakeries, two in Lewiston, Maine, and one in
Once integrated, the Lepage facilities will augment Flower's
direct-store-delivery facility whose accessibility will increase
from 64% to 70% of the U.S. population. The expected figure comes
closer to Flowers goal of attaining at least 75% by 2016.
Flowers management anticipates the transaction to be accretive
by 3-5 cents to its 2012 earnings per share, excluding one-time
acquisition costs. For 2013, the merger will inject 8-12 cents to
Flowers' earnings per share. Upon completion of the transaction,
Lepage's employees will join Flowers Foods with senior officials
continuing to lead from the front.
Flowers Foods has been active in inorganic expansion. It has
made over 100 acquisitions since it got listed publicly in 1968. It
has set a long-term goal to grow through acquisitions, making
entries into new markets, and trying new product offerings.
Geogia-based Flowers Foods competes with the likes of
Corn Products International Inc.
). Flowers Foods currently retains a Zacks #3 Rank, which
translates into a short-term Hold rating. We also maintain our
long-term Neutral recommendation on the stock.
FLOWERS FOODS (FLO): Free Stock Analysis Report
INGREDION INC (INGR): Free Stock Analysis
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