HANOVER, Pa.--(BUSINESS WIRE)--Utz Brands, Inc. (NYSE: UTZ) announced that effective today, its subsidiaries Utz Quality Foods, LLC and Heron Holding Corporation have completed the acquisition of Truco Enterprises, a leading seller of tortilla chips, salsa and queso under the ON THE BORDER® brand, for a total purchase price of $480 million, subject to a customary post-closing purchase price adjustment. The acquisition includes the ON THE BORDER® trademarks 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 $50 million excluding estimated synergies, and 8.4x estimated fiscal 2020 Truco Adjusted EBITDA including run-rate cost synergies of at least $5 million, in each case including approximately $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.
In connection with the transaction, Utz announced that it will redeem all outstanding public warrants and forward purchase warrants (the “Redeemable Warrants”), which if exercised in full by all holders of the Redeemable Warrants will result in approximately $181.3 million of gross proceeds to Utz and an additional 15.8 million shares of Class A Common Stock being issued and outstanding. These proceeds, together with up to $320 million of incremental term loans, are anticipated to be used to repay the bridge debt financing that was used by Utz to fund the purchase price for the Truco acquisition. After giving effect to the expected exercise of all the Redeemable Warrants and the incremental term loans, Utz will have a net leverage ratio of approximately 3.8x 2020 Combined Utz and Truco Adjusted EBITDA including expected Truco run-rate cost synergies of at least $5 million.
The addition of ON THE BORDER® to Utz’s portfolio of brands provides the Company with the #3 position in the attractive $6.3 billion retail sales tortilla chip sub-category, which grew 10.5% in the 52 weeks ending November 29, 2020. The transaction also strengthens Utz’s national geographic footprint, with the majority of OTB’s sales in Utz’s Expansion and Emerging geographies, and enhances the Company’s presence in the Mass and Club retail channels where OTBhas 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 in which OTB is under-penetrated, including Grocery and Convenience, and to increase marketing and innovation investments behind the ON THE BORDER® brand.
Warrant Details
Prior to the Redemption Date (as defined below), the Redeemable Warrants are exercisable for an aggregate of approximately 15.8 million shares of Class A Common Stock at a price of $11.50 per share, representing potential gross proceeds to Utz of approximately $181.3 million. The Redeemable Warrants consist of warrants to purchase shares of Utz Class A Common Stock that were issued under the Warrant Agreement, dated as of October 4, 2018 (the “Warrant Agreement”), by and among the Company and Continental Stock Transfer & Trust Company, as warrant agent (the “Warrant Agent”), as part of the units sold in Collier Creek Holdings’ initial public offering and pursuant to the Forward Purchase Agreements, dated as of September 7, 2018, among the Company, Collier Creek Partners LLC (the “Sponsor”) and certain of the Company’s current and former independent directors, at a redemption price of $0.01 per Redeemable Warrant (the “Redemption Price”) for those Redeemable Warrants that remain outstanding following 5:00 p.m. New York City time on the Redemption Date. Warrants to purchase up to 7.2 million shares of Class A Common Stock at a price of $11.50 per share that were issued under the Warrant Agreement in a private placement and held by permitted transferees of the Sponsor are not subject to this redemption and are expected to remain outstanding following the warrant redemption.
Under the terms of the Warrant Agreement, the Company is entitled to redeem all of such outstanding Redeemable Warrants if the reported closing price of the Company’s Class A Common Stock is at least $18.00 per share on each of the twenty trading days within a thirty trading day period. This share price performance requirement was satisfied as of December 10, 2020.
On December 15, 2020, the Warrant Agent will deliver a notice of redemption to each of the registered holders of such outstanding Redeemable Warrants on behalf of Utz.
All such Redeemable Warrants may be exercised by the holders thereof until 5:00 p.m. New York City time on January 14, 2021 (the “Redemption Date”) to purchase fully paid and non-assessable shares of the Company’s Class A Common Stock underlying such Redeemable Warrants, at the exercise price of $11.50 per share.
Any such Redeemable Warrants that remain unexercised following 5:00 p.m. New York City time on the Redemption Date will be void and no longer exercisable, and the holders of those Redeemable Warrants will be entitled to receive only the Redemption Price of $0.01 per warrant.
None of the Company, its board of directors or employees has made or is making any representation or recommendation to any holder of the Redeemable Warrants as to whether to exercise or refrain from exercising any Redeemable Warrants.
The issuance of shares of Class A Common Stock underlying such Redeemable Warrants from Utz to the holders of the Redeemable Warrants has been registered by Utz under the Securities Act of 1933, as amended, and such shares of Class A Common Stock are covered by a registration statement filed on Form S-1 with, and declared effective by, the Securities and Exchange Commission (Registration No. 333-248954).
Questions concerning redemption and exercise of such Redeemable Warrants can be directed to Continental Stock Transfer & Trust Company, our Warrant Agent, at (212) 509-4000.
For a copy of the notice of redemption sent to the holders of such Redeemable Warrants, please visit our investor relations website at https://investors.utzsnacks.com/investors/default.aspx.
No Offer or Solicitation
This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any offer of any of the Company’s securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction.
Advisors
Goldman Sachs acted as lead financial advisor, BofA Securities acted as financial advisor, and Cozen O’Connor served as legal counsel to Utz Brands, Inc. Harris Williams & Co. acted as lead financial advisor and Kirkland & Ellis LLP acted as legal counsel to Truco Enterprises.
About Utz Brands, Inc.
Utz manufactures a diverse portfolio of savory snacks under popular brands including Utz®, Zapp’s®, Golden Flake®, Good Health®, Boulder Canyon®, Hawaiian® Brand, and Tortiyahs! ® among others.
After nearly a century with strong family heritage, Utz continues to have a passion for exciting and delighting consumers with delicious snack foods made from top-quality ingredients. Utz’s products are distributed nationally and internationally through grocery, mass merchant, club, convenience, drug and other channels. Based in Hanover, Pennsylvania, Utz operates fourteen facilities located in Pennsylvania, Alabama, Arizona, Illinois, Indiana, Louisiana, Washington, and Massachusetts. For more information, please visit www.utzsnacks.com or call 1‐800‐FOR‐SNAX.
About Truco Enterprises
Truco is a leading developer and marketer of tortilla chips, salsa, and queso under the ON THE BORDER® brand. The Company’s products are sold nationally through grocery retailers, club stores, and mass merchandisers. Truco Enterprises is the exclusive licensee of the ON THE BORDER®brand for food products sold through retail. For more information, please visit www.ontheborderchips.com. Truco Enterprises is a portfolio company of Insignia Capital Group.
