Utz Brands Inc. (UTZ) is acquiring Festida Foods from Great Lakes Festida Holdings for a total consideration of $41 million. The transaction is expected to close in Q2.
Utz Brands holds a diverse portfolio of snack brands. These include Utz, ON THE BORDER Chips and Dips, Golden Flake, Zapp’s, Good Health, Boulder Canyon, Hawaiian, and TORTIYAHS!
Festida Foods develops and co-packs tortilla chips, corn chips, and pellet snacks for food brands across the U.S. It has already positioned itself as the largest manufacturer of tortilla chips for Utz’s ON THE BORDER tortilla chip brand.
Utz expects the acquisition to be earnings accretive from 2021. The acquisition price implies a 6x multiple to Festida’s 2020 EBITDA of $6 million (excluding estimated synergy).
Utz CEO Dylan Lissette said, “We expect that this strategic acquisition will enable strong supply chain synergies for our ON THE BORDER brand and enhance our ability to expand both ON THE BORDER and other Utz Power Brands geographically in the Midwest.” (See Utz Brands stock analysis on TipRanks)
Lissette added, “Over time, we intend to expand production capabilities in the manufacturing plant to support growth in adjacent sub-categories and better serve current and future retail customers in an important area of geographic growth for the Company.”
Further, Utz expects this vertical integration to generate net present value of $5 million from tax benefits and $1 million in cost synergies.
Last month, Piper Sandler analyst Michael Lavery reiterated a Buy rating on Utz with a target price of $28 (5% upside potential).
Lavery highlights the popularity of the company’s brands among teenagers. Coupled with an expansion in distribution to new geographies and channels, this bodes well for the stock.
Consensus on the Street is that Utz is a Moderate Buy, based on 4 Buys and 2 Holds. The average analyst price target of $27.83 implies 4% potential upside. Shares have surged by about 154.7% over the past year.
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