Sector News

Metropoulos to invest in Utz Quality Foods

October 21, 2016
Food & Drink

The financier that brought back the company behind such treats as Twinkies and Ding Dongs is investing more than $146 million in a 95-year-old, family-owned snack company.

Private-equity firm Metropoulos & Co., which brought Hostess Brands out of liquidation three years ago, is the first outside investor in Utz Quality Foods Inc., which makes several brands of potato chips, pretzels and cheese snacks. Over the years, Metropoulos has also bet on companies that produce Pabst Blue Ribbon beer, Bumble Bee Foods tuna and Chef Boyardee pasta.

Utz, which expects sales of $800 million next year, is the largest family-owned and run salty snack maker in the U.S.

Mergers, acquisitions and investments in the food industry have been on the rise, as big food makers look to expand into brands that are perceived to be fresher and more natural.

Utz, based in Hanover, Pa., will use the new investment to fund its recent acquisition of Alabama-based chip and popcorn maker Golden Enterprises, according to Dylan Lissette, Utz’s chief executive.

The Rice family, which has owned and operated Utz for four generations and will remain majority shareholders, has made several acquisitions in the past five years, including Good Health pretzels and veggie straws and Zapp’s kettle-style potato chips.

“Utz has quietly become a near century-old snack powerhouse,” said Evan Metropoulos, a principal of the private-equity firm.

Deal activity has been rampant in the food industry in the past couple of years. More than $116 billion worth of deals involving U.S. companies were announced last year, the largest total dollar amount in at least two decades, according to Dealogic data. They include Hormel Foods’ $775 million purchase of organic-meats company Applegate Farms LLC and Campbell Soup Co.’s $231 million acquisition of Garden Fresh Gourmet Inc.

So far this year, companies have announced 190 deals involving U.S. food and beverage companies, an 8.6% increase from the year-earlier period, though this year’s deals have less total value.

Daren Metropoulos, another principal of Metropoulos, said the combination of growth potential and heritage makes Utz appealing to his firm, which specializes in expanding and reviving well-known American brands. Metropoulos said the Utz transaction is the largest initial private-equity transaction for a U.S. snack company since 2013, when Metropoulos and Apollo Global Management bought Hostess out of liquidation in a deal valued at $2.3 billion, including cash, equity and debt. That deal required an initial cash investment of $185 million, The Wall Street Journal reported.

As Hostess prepares to become a public company again, Metropoulos and Apollo stand to make returns of more than 10 times their original investment.

By Annie Gasparro

Source: Wall Street Journal

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