Boulder Brands (NASDAQ:BDBD), which launched an ambitious attempt to gather some of the region’s highest profile natural food companies under one umbrella, is itself being acquired by industry giant Pinnacle Foods, the New Jersey-based owner of Bird’s Eye, Vlasic and Log Cabin brands, among others.
Under the terms of the agreement, Pinnacle will acquire all of the outstanding shares of Boulder Brands for $11 each, a transaction valued at about $975 million, including $265 million of debt, according to a news release. The transaction is expected to close by the end of the first quarter next year.
“It is probably the largest single food event in Boulder’s history from a money standpoint,” said Bill Capsalis, president of the trade group Naturally Boulder, which represents 120 natural food companies in Colorado. “It (Boulder Brands) is a very important cornerstone business for the natural and organic industry in town.”
Headquartered in Boulder, the company owns Udi’s, EVOL, Smart Balance and Earth Balance, among others. It had revenue of more than $500 million in 2014 and reported a year-end loss of $127 million.
Though its financial status has stabilized somewhat, this year has proved tumultuous, with the departure of Steve Hughes, its co-founder and chief executive, in June and layoffs in July. In August, it announced it was evaluating strategic alternatives, including a potential sale.
In another shakeup in October, Managing Partner Duane Primozich left the company. Primozich had served as executive vice president of the Balance Brands division, which includes Smart Balance and Earth Balance, two product categories that have been plagued by declining sales.
Through the third quarter of this year, Boulder Brands reported sales of $132.9 million, down from $133.9 during the same period in 2014. What impact the acquisition will have on local employees wasn’t clear Tuesday. Employees at its headquarters, at 1600 Pearl St., declined to comment and the company declined to answer additional questions.
In a statement, Bob Gamgort, the CEO of Pinnacle, said he plans to keep Boulder Brands headquarters in Boulder.
“The acquisition of Boulder Brands further expands our health and wellness portfolio, currently anchored by the Birds Eye and Gardein brands,” Gamgort said. “The acquisition provides us with an important health and wellness talent pool in Boulder.”
Boulder Brands Chairman Dean Hollis said the acquisition will provide shareholders with increasing value and the company with additional resources.
“This combination provides significant benefits for all stakeholders,” Hollis said. “Together with Pinnacle Foods, Boulder Brands will have additional and stronger resources to drive our brands and deliver value to customers, while providing new opportunities for employees.”
The deal bolsters Pinnacle’s presence in natural grocery stores, gives it additional holdings in the growing natural and organic foods industry, and provides it a means of tapping into a younger customer base, Gamgort said.
Pinnacle officials said they expect cost-savings to occur in areas that include administration and production, but didn’t specify how or when cost-cutting would occur.
In a call with analysts Tuesday morning, Gamgort noted that Pinnacle will review Boulder Brands’ operations, including its manufacturing facilities.
“I think that we have a really nice situation here where we’re going to be able to get the overhead costs more in line with the growth targets of this business,” Gamgort said.
Gamgort also said he sees an opportunity to “reinvigorate” the struggling Smart Balance brand. Gamgort lauded the upside of plugging brands such as Evol and Udi’s into Pinnacle’s expansive distribution and retail network. By acquiring Udi’s and Glutino, Pinnacle gains the leaders in a growing gluten-free category, he said.
“This is not a fad,” he said. “This is a sustainable trend that’s driven by a real consumer need.”
Boulder Brands shares were trading at $10.92 late Tuesday, up 85 cents from Monday’s close. The company’s 52-week high is $11.85. Pinnacle (NYSE:PF) was trading at $42.57, down 63 cents. It’s 52-week high is $48.13.
