By DAVID BENOIT
Looking for growth, B&G Foods Inc. has turned to pirates.
Courtesy of Pirate Brands
The publicly-traded grocery-brand conglomerate is buying Pirate Brands, the maker of the white-cheddar-cheese rice and corn puffs Pirate’s Booty, for $195 million.
B&G FoodsBGS -0.46%, the owner of grocery brands including Grandma’s Molasses, Ortega and Cream of Wheat, has been expanding into the snack aisle and just landed the healthy option in its third deal for a snack company.
CEO David Wenner told analysts on a conference call the price was at a higher valuation than B&G has typically paid for a company in a deal, but said that Pirate’s Booty was going to expand the company’s offerings and its growth rate. He added that he hoped that it would “broaden our appeal as a stock going forward.”
Shares rose 6.2% to $31 on Monday.
Though he wasn’t specific, Wenner said Pirate’s Booty had been growing at double-digit rates in recent years. And despite its high valuation, the deal would still be cash-flow accretive on closing, which it expects next month, he said.
Though Pirate’s Booty, and its other offerings of flavored rice-puffs, are marketed toward children, a target B&G does not normally aim for, Wenner said the appeal is broad. He believed the all-natural and healthy-snack aspects of the brand is particularly relevant to today’s consumer.
“The brand is oriented toward kids to a great degree but kids are certainly not the only users,” Wenner said. “The fact that it is in the house tends to mean everybody is eating the product.”
Pirate’s Booty is currently owned by financial backers VMG Partners and Driven Capital Management as well as Robert Ehrlich, who founded the business in 1987.
Mike Repole, the chairman of Pirate Brands, said in a statement that he was “very proud” of the past five years including “increasing sales more than three-fold.” He called the transaction successful.
Wenner said B&G saw opportunities for expanding other flavors, as the majority of sales are white cheddar, and that in general B&G is looking at snack foods as a way to boost the whole company’s growth. Last October it closed a deal to buy New York Style, the maker of Bagel Crisps, and Old London brands for $62.5 million in cash.
“We understand that snacks, by definition almost, is a higher-growth business that we need to think about differently than we do most of our businesses,” Wenner said.
UPDATE: This post has been updated with the statement from Pirate Brands’ chairman. Also, Pirate Brands calls its snack products all-natural. An earlier version of this article incorrectly characterized the products as organic.