The next time you buy a bag of Skinny Pop popcorn or Tyrrells hand-cooked potato chips, you may see a candy giant’s logo on top. Candy and chocolate giant The Hershey Co. is set to acquire Amplify Snack Brands for $1.6 billion as it attempts to move beyond its sugary business model and into the healthy snack food industry.
Monday’s deal would see Hershey purchase all outstanding Amplify stock for $12 per share in cash. This represents a 71% premium from Friday’s close of $7. The transaction is expected to be completed in the first quarter of 2018.
Is it a bet that will pay off?
Details Behind Hershey-Amplify Acquisition
In 2017, a wide array of Big Food companies have bought snack brands to diversify their portfolios of brands and to tap into the increasing market of mobile eaters. Campbell’s Soup, for instance, is trying to get its hands on Snyders-Lance, the maker of Cape Cod potato chips, PopSecret popcorn, and Snyders of Hannover pretzels.
You can now add Hershey to the list of brands getting the nutritious food itch.
On Monday, Hershey shares tumbled 1.5% and Amplify shares surged 71% in pre-market trading when the merger was officially announced. Boards of both companies have given the nod to the transaction that sees Hershey grab the Austin, Texas-based firm’s brands: Oatmega protein bars, Tyrrells potato chips, Skinny Pop popcorn, and Paqui chips.
Under the terms of the agreement, the $1.6 billion deal will have Hershey take onAmplify’s net debt and include a make-whole payment of $76 million to the Tax Receivable Agreement (TRA). It is estimated that $20 million will be saved in annual synergies over the next two years.
Hershey said that the move would allow it to capture a greater share of the consumer snacking market.
This is seen as the first substantial move by Michele Buck, Hershey president and CEO, who took over the reins earlier this year. Buck has been keen on creating a presence in the $33 billion snack industry.
She said in a statement:
“The acquisition of Amplify and its product portfolio is an important step in our journey to becoming an innovative snacking powerhouse as together it will enable us to bring scale and category management capabilities to a key sub-segment of the warehouse snack aisle. Hershey’s snack mix and meat snacks products, combined with Amplify’s Skinny Pop, Tyrrells, Oatmega, Paqui and other international brands, will allow us to capture more consumer snacking occasions by creating a broader portfolio of brands.”
Amplify, founded in 2014 and going public a year later, stated that its objective of transparency, clean ingredients, and scrumptious snacks will be maintained by Hershey moving forward. Amplify has a $537 million market cap.
Tom Ennis, Amplify president and CEO, said in a statement:
“Since Amplify’s inception in 2014, our company’s goal has been to bring transparency to our products, and clean ingredients and great tasting snacks to consumers. This transaction is a continuation of our mission as Hershey also believes in bringing to consumers great-tasting snacks made with the best ingredients possible. Hershey is a great cultural partner for Amplify and I’m excited for our team who will have access to Hershey’s marketing and go-to-market resources to take our brands to the next level.”
JP Morgan and Morgan Stanley served as financial advisers to Hershey, while Skadden, Arps, Slate, Meagher &Flom LLP acted as legal consultants.
Big Food Perfects ‘Snackfection’
According to CNBC, Hershey is trying to perfect the term “snackfection,” a blend of sweet and salty snacks. This isn’t Hershey’s first venture into the salubrious food market. In 2015, Hershey nabbed Krave Pure Foods and the parent company of barkTHINS, a so-called healthy chocolate bar brand, in 2016.
Big Food has increasingly made investments in snacks. This year alone, Kellogg spent $600 million on getting its hands on RXBar, while Campbell’s Soup is nearing a $4.87 billion acquisition of Snyder’s-Lance.
The healthy snack food industry has become big business in recent years. With consumers’ appetites for on-the-go wholesome food, some of the largest names in serving junk are now delving into this niche. In the last few years, J.M. Smucker bought Sahale Snacks, Campbell’s Soup swallowed Garden Fresh Gourmet, and Mondelez International purchased Enjoy Life Foods.
Even Amplify hopped on the snack-betting bandwagon in 2016 when it absorbed Tyrrells for $391 million.
Of course, who can forget about McDonald’s foray into healthier menu options?
Just before millennials became the biggest consuming force in the world, it was believed that the food industry would drastically transform – McDonald’s would perish and Chipotle would flourish. Not quite. Although millennials are more likely to seek out healthier alternatives than their generational predecessors, they still want something fast and cheap in their bodies, and the likes of Hershey, Mondelez, and Kellogg are acquiescing to their demands.
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