Premium Brands announces Oberto acquisition and acquisition financing

Premium Brands Holdings Corporation (TSX: PBH), a portfolio company of Pender West Capital Partners Inc., has signed a definitive agreement to purchase substantially all of the assets and operating divisions of Seattle based Oberto Sausage Company. Financial terms were not disclosed.

Oberto is one of North America’s leading manufacturers of beef jerky and other protein based snack foods, which it sells under its Oberto, Pacific Gold, Pacific Gold Reserve and Cattleman’s Cut brands. The company was founded in 1918 by Constantino Oberto and later led by Constantino’s son Art Oberto who, along with other family members, still own it today.

Premium Brands also increased its investment in Vancouver based McLean Meats Inc. to 66.2% from the previous 36.2%. The combined purchase price for the Company’s investments in Oberto and McLean is approximately $237 million. In May 2013, Premium Brands acquired a 25% equity interest in McLean Meats for $#Subscribers ONLY – where and how did you get your news? Subscribe today to see our research on this and all other subscriber ONLY news. Be informed!#

To fund the Oberto acquisition, Premium Brands has entered into an agreement with a syndicate of underwriters co-led by CIBC Capital Markets, Scotiabank, BMO Capital Markets and Cormark Securities Inc. for a bought-deal of 1,280,000 subscription receipts at $117.35 per subscription receipt for gross proceeds of approximately $150 million.

Pender West Capital Partners Inc., through Pender West Investors Inc., owns #Subscribers ONLY – where and how did you get your news? Subscribe today to see our research on this and all other subscriber ONLY news. Be informed!#

photo credit: Oberto Sausage Company

News Release

PREMIUM BRANDS HOLDINGS CORPORATION ANNOUNCES ACQUISITION OF OBERTO MEAT SNACKS, CREATION OF NORTH AMERICAN MEAT SNACK PLATFORM AND EQUITY FINANCING

NOT FOR DISTRIBUTION TO U.S. NEWS SERVICES OR DISSEMINATION IN THE UNITED STATES

VANCOUVER, B.C., April 12, 2018. Premium Brands Holdings Corporation (TSX: PBH), a leading producer, marketer and distributor of branded specialty food products, announced today that it has signed a definitive agreement to purchase substantially all of the assets and operating divisions of Seattle based Oberto Sausage Company.

Oberto is one of North America’s leading manufacturers of beef jerky and other protein based snack foods, which it sells under its Oberto, Pacific Gold, Pacific Gold Reserve and Cattleman’s Cut brands. The company was founded in 1918 by Mr. Constantino Oberto and later led by Constantino’s son Mr. Art Oberto who, along with other family members, still own it today.

The transaction is expected to close within the next four to six weeks and is subject to customary closing conditions including regulatory approvals such as expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

“We are very pleased to be welcoming the Oberto organization into our group. Its values, culture, loyal employees and talented management team are an ideal fit for us. Furthermore, we are very excited about being entrusted with the iconic Oberto brand, which we have followed and admired for many years,” said Mr. George Paleologou, President and CEO of Premium Brands.

“This transaction will create a leading North American platform in the rapidly growing meat snacks product category and will feature Canada’s top meat snack brands, including McSweeney’s, Grimm’s, Freybe, Piller’s and Harvest, as well as Oberto’s iconic family of brands and our fast emerging, U.S. based Hempler’s brand. I have no doubt that both Oberto and our legacy businesses will benefit from each other’s respective strengths.

“Oberto will be our third major investment in Washington State. Our two prior ones: sandwich maker SK Food Group and premium processed meats producer Hempler Foods Group, have both prospered under the Premium Brands umbrella with their combined sales growing from under US$130 million in 2011 to over US$560 million last year. We fully expect Oberto to replicate this type of success by combining its current strengths with access to our various resources,” added Mr. Paleologou.

“We are very excited to be joining the Premium Brands group. Its entrepreneurial culture and respect for the uniqueness of its individual businesses, combined with its focus on quality, innovation and long term decision making makes Premium Brands a perfect fit for our business,” said Mr. Tom Hernquist, CEO of Oberto. “Furthermore, we are also very excited about accelerating the growth of our business by accessing the resources and abilities of Premium Brands, including its Canadian distribution channels, product development expertise and supply chain infrastructure,” added Mr. Hernquist.

“We are very proud of what we have achieved over the past 100 years as a family owned and operated business and it was an extremely difficult decision to make as to what would be the best next step in the evolution of Oberto. We wanted to ensure that we found a partner that would not only honor the traditions, values and most importantly, the people, that are at the heart of Oberto’s success; but also one that shared our vision for its future,” said Mr. Art Oberto. “My family and I have been very impressed with how Hempler’s and SK Food Group have thrived under the Premium Brands umbrella and do not doubt that they are the right partner to take us forward.”

“We are also pleased to announce that we increased our investment in Vancouver based McLean Meats Inc. to 66.2% percent from the previous 36.2%,” said Mr. Paleologou. “McLean is a niche marketer and supplier of branded, high quality, preservative free and organic processed meats to foodservice and retail customers across Canada,” added Mr. Paleologou.

The combined purchase price for the Company’s investments in Oberto and McLean is approximately $237 million while the combined revenues of the two businesses are approximately $246 million. These transactions are expected to be immediately accretive to both Premium Brands’ earnings per share and free cash flow per share for 2018.

Cody Peak Advisors acted as financial advisor to Oberto.

Equity Financing

Concurrent with the Oberto acquisition, Premium Brands entered into an agreement with a syndicate of underwriters co-led by CIBC Capital Markets, Scotiabank, BMO Capital Markets and Cormark Securities Inc. (collectively, the “Underwriters”), pursuant to which the Company will issue on a “bought-deal” basis, 1,280,000 subscription receipts (the “Subscription Receipts”) at a price of $117.35, (the “Offering”), for gross proceeds of approximately $150 million. The Company has also granted the Underwriters an over-allotment option to purchase up to an additional 192,000 Subscription Receipts (or, in certain circumstances, common shares), on the same terms, exercisable in whole or in part at any time for a period of up to 30 days following closing of the Offering, to cover over-allotments, if any. The net proceeds of the Offering will be used to partially finance the acquisition of Oberto.

Each Subscription Receipt represents the right of the holder to receive, upon closing of the Oberto acquisition, without payment of additional consideration, one common share of Premium Brands plus an amount per common share equal to the amount per common share of Premium Brands of any dividends for which record dates have occurred during the period from the closing date of the Offering to the date immediately preceding the closing date of the Oberto acquisition, less withholding taxes, if any. Closing of the Offering is expected to occur on or about May 2, 2018. The Offering is subject to normal regulatory approvals, including approval of the Toronto Stock Exchange.

The Subscription Receipts will be offered in each of the provinces and territories of Canada by way of a short form prospectus, and by way of private placement in the United States to “qualified institutional buyers” pursuant to Rule 144A or in such a manner as to not require registration under the United States Securities Act of 1933, as amended.

About Premium Brands

Premium Brands owns a broad range of leading specialty food manufacturing and differentiated food distribution businesses with operations in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia, California, Nevada, Ohio, Arizona, Minnesota, Mississippi and Washington State. The Company services a diverse base of customers located across North America and its family of brands and businesses include Grimm’s, Harvest, McSweeney’s, Piller’s, Freybe, SJ Fine Foods, McLean Meats, Expresco, Belmont Meats, Leadbetter, Skilcor, The Meat Factory, Hempler’s, Isernio’s, Fletcher’s U.S., Direct Plus, Country Prime Meats, Audrey’s, SK Food Group, OvenPride, Bread Garden Go, Hygaard, Quality Fast Foods, Deli Chef, Buddy’s Kitchen, Raybern’s, Creekside Bakehouse, Stuyver’s Bakestudio, Island City Baking, Shaw Bakers, Partners Crackers, Conte Foods, Larosa Foods, Gourmet Chef, Duso’s, Centennial Foodservice, B&C Food Distributors, Shahir, Wescadia, Harlan Fairbanks, Maximum Seafood, Ocean Miracle, Hub City Fisheries, Diana’s Seafood, C&C Packing, Premier Meats, Interprovincial Meat Sales and Frandon Seafoods.

For further information, please contact George Paleologou, President and CEO or Will Kalutycz, CFO at (604) 656-3100.
www.premiumbrandsholdings.com

The securities to be offered have not been and will not be registered under the United States Securities Act of 1933, as amended, or under any state securities laws, and may not be offered, sold, directly or indirectly, or delivered within the United States of America and its territories and possessions or to, or for the account or benefit of, United States persons except in certain transactions exempt from the registration requirements of such Act. This release does not constitute an offer to sell or a solicitation to buy such securities in the United States, Canada or in any other jurisdiction where such offer is unlawful.


Ted Liu
Ted Liu, M.Sc. (Mining), MBA (Finance), is the Editor of Private Capital Journal, TechnologyMetals.ca, GoldSilverMetals.ca, and former Editor of Canadian Private Equity. Ted has been passionately tracking Canadian private capital industry since 1992, most recently served as Research Director for The Canadian Venture Capital and Private Equity Association (CVCA). Ted was the architect of CVCA infobase, and is the architect of sophisticated and advanced CPE Media Private Capital Dealbase. Ted is President of CPE Media Inc., Canada's independent, trusted and unbiased data provider tracking Canadian VC/PE, private capital industry and public market.
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