THOMASVILLE, GA. — Flowers Foods, Inc. has reached a definitive agreement to acquire Canyon Bakehouse L.L.C., a privately-held gluten-free baking company, for approximately $205 million, including a performance-based contingent payment of $5 million. The transaction is subject to regulatory approval and customary closing conditions and is expected to close in the fourth quarter of 2018.

Based in Johnstown, Colo., Canyon Bakehouse offers 21 gluten-free bread, buns, bagels, English muffins and specialty items, primarily distributed frozen through natural, specialty, grocery and mass retailers nationwide. The Canyon Bakehouse brand is the top gluten-free loaf brand in the natural and specialty channel, the No. 2 brand in the overall gluten-free loaf category and the fastest-growing gluten-free bread loaf brand in the United States, according to sales data from SPINS and Information Resources, Inc.

The company was founded in 2009 by Josh and Christi Skow and Ed Miknevicius and has 206 employees at a 165,625-square-foot bakery with two production lines in Johnstown. Under terms of the transaction, Mr. Skow will continue to lead the business as president, and Ms. Skow, who has celiac disease, will serve as brand ambassador.

“Canyon Bakehouse is an innovative leader in a growing segment of the bakery category, which closely aligns this acquisition with our strategic goals,” said Allen L. Shiver, president and chief executive officer of Flowers Foods.  “They have great products, a talented team of employees, a state-of-the-art gluten-free bakery and a brand with an enthusiastic fan following. We see opportunities to leverage Flowers Foods’ distribution network and retail partnerships to drive growth by bringing Canyon Bakehouse products to more consumers across the country. We look forward to welcoming Josh, Christi and the rest of Canyon Bakehouse’s employees to the Flowers team.”

Canyon Bakehouse bread and bagelsCanyon Bakehouse has generated a compound annual net sales growth rate of approximately 45% since 2014. The gluten-free packaged bread category has grown at a rate of 6.6% per year since 2015, outpacing the broader $14.5 billion U.S. retail baked foods market, according to SPINS and I.R.I. data. The company expects to generate approximately $70 million to $80 million in net sales in 2019.

“Since the beginning, the mission of Canyon Bakehouse has been to help those who have given up gluten to ‘Love Bread Again,’” Mr. Skow said. “We are tremendously pleased with the brand, the products and the teams that we have developed and grown over the past nine years, and we are thankful for the many partners who have helped us along the way. We are now very excited about the opportunities for our company alongside Flowers Foods. With Flowers’ national reach, we will be able to bring our gluten-free products to many more consumers. Flowers shares our passion for baking, and they understand what makes our company and our products unique. We look forward to joining the Flowers Foods family.”

Flowers Foods plans to fund the transaction with cash on-hand and existing credit facilities and expects the acquisition to be accretive to fiscal 2020 earnings.