Credit Suisse: B&G's spices acquisition was 'savvy'

by Eric Schroeder
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ACH Spices and Seasonings, B&G Foods
ACH Food makes spices and seasonings under such brands as Spice Islands, Tone’s, Durkee and many others.

NEW YORK — Credit Suisse on Oct. 7 raised its 2017 earnings-per-share guidance for B&G Foods Inc. to $2.70, up from a previous estimate of $2.35 per share and compared with a forecast of $2.15 per share for 2016. The increase reflected what the ratings agency called a “highly accretive” acquisition of the spices business of ACH Food Companies.

Robert Moskow, Credit Suisse
Robert Moskow, research analyst with Credit Suisse

“B&G has executed a savvy transaction with a motivated seller that increases its presence in one of the few on-trend categories in the packaged foods space and offers potential synergies with the core Mrs. Dash and Ortega brands,” Robert Moskow, research analyst with Credit Suisse, wrote in the report.

B&G Foods entered the agreement to acquire the spices business on Sept. 21 at a purchase price of $365 million. ACH Food makes spices and seasonings under such brands as Spice Islands, Tone’s, Durkee and many others. The company also markets Weber brand sauces that are sold under license by the company.

Mr. Moskow said adding ACH’s brands into the B&G Foods portfolio will boost the company’s market share in spices to 8.7%, from 2.9% currently, and positions it as the No. 2 player in the fast-growing market.

ACH Spices facility in Iowa
The purchase of ACH includes a manufacturing facility in Ankeny, Iowa.

“The spice and seasonings category has been growing at a 5.3% rate over the past three years because consumers (especially millennials) are looking for recipe solutions to lead healthier lifestyles, take control of their food intake and create social experiences,” Mr. Moskow said. “The market leader, McCormick, says it has made life more difficult for second-tier brands like these by persuading retailers to emphasize premium brands and higher price points in their merchandising sets. But our data indicate that the ACH brands have been growing at a comfortable 4% rate and have been getting appropriate marketing support. In other words, this is not a business that needs fixing.”

The purchase of ACH includes a manufacturing facility in Ankeny, Iowa, that Mr. Moskow said Credit Suisse believes eventually may be combined with the manufacturing operations of B&G’s Mrs. Dash brand. He said the seasonings also may be used in the flavor packs of B&G’s Ortega and Emeril Brands, providing total savings of between $2 million and $5 million. 
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