Utz Brands: to Acquire Truco Enterprises

Hanover / PA. (utz) Utz Brands Inc., a leading U.S. manufacturer of branded salty snacks, announced that its subsidiaries Utz Quality Foods LLC (UQF) and Heron Holding Corporation have entered into a definitive agreement to acquire Truco Enterprises, a leading seller of tortilla chips, salsa and queso under the «on the border» (OTB) brand, from Insignia Capital Group for a total purchase price of USD 480 million, subject to a customary post-closing purchase price adjustment. The acquisition includes all rights to the «on the border» trademarks for use in the manufacture, sale, and distribution of snack food products in the United States and certain other international markets. The transaction represents an acquisition multiple of approximately 9.2x estimated fiscal 2020 Truco Adjusted Ebitda of USD 50 million excluding estimated synergies, and 8.4x estimated fiscal 2020 Truco Adjusted Ebitda including run-rate cost synergies of at least USD 5 million, in each case including approximately USD 20 million in net present value from expected tax assets resulting from the transaction. Utz expects the transaction to be accretive to earnings in 2021 and beyond. The transaction is expected to close in December 2020 and is subject to customary closing conditions including the receipt of regulatory approvals.

The «on the border» brand provides Utz a growing Power Brand with significant scale in the attractive USD 6.2 billion retail sales tortilla chip sub-category, the #2 sub-category in salty snacks behind potato chips, as well as a meaningful presence in salsa, queso, and dips, and a strong innovation pipeline. The transaction also strengthens Utz’s national geographic footprint, with the majority of OTB’s sales in Expansion and Emerging geographies, and enhances the Company’s presence in the Mass and Club retail channels where OTB has a strong position. Utz plans to use its robust sales, manufacturing, and distribution platform to expand «on the border» tortilla chips, salsa, and queso further into channels where OTB is under-penetrated, including Grocery and Convenience, and to increase marketing and innovation investments behind the brand.

«This strategic acquisition will make Utz a significant competitor in the tortilla chip sub-category, where OTB holds the #3 position, and also provides us with a meaningful position in salsa, queso, and dips,» said Dylan Lissette, CEO of Utz. «In combination with our small but growing premium Tortiyahs!® brand, the integration of the «on the border» brand will continue to improve Utz’s scale and product diversification, which are important success factors in salty snacks. This acquisition strengthens our competitive position, as well as our financial profile. We are confident this transaction will drive long-term value creation for our stockholders and help position us for continued long-term growth.»

«The Truco team is thrilled to be joining the Utz family of brands, and we are thankful to our partners at Insignia Capital for all of their support,» said Shane Chambers, CEO of Truco Enterprises. ««on the border» is now one of the fastest growing tortilla chip brands, and the fastest growing dip brand in the category. Utz will be able to leverage its world class Direct Store Delivery network to help expand our brand into new markets. As a result, more consumers across the U.S will have access to our delicious, high quality tortilla chips and dips. I’m looking forward to working with Dylan and the rest of the Utz senior management team to continue our excellent growth trajectory.»