Utz Brands To Acquire Vitner’s Snack Food Brand And Distribution Assets

Utz Brands, Inc. (NYSE: UTZ) ("Utz" or the "Company"), a leading U.S. manufacturer of branded salty snacks, announced that its subsidiary Utz Quality Foods, LLC ("UQF") has entered into a definitive agreement with Snak-King Corp. ("Snak King") to acquire certain assets related to the Vitner's brand ("Vitner's"), a leading brand of snack foods in the Chicago metropolitan market, for a total purchase price of $25 million, subject to customary purchase price adjustments.

The acquired assets include the intellectual property, including the Vitner's® trademark, and direct-store-delivery (“DSD”) distribution assets related to Vitner's branded products. The transaction represents an acquisition multiple of approximately 5.9x last twelve months ended September 27, 2020 Vitner's Pro Forma Adjusted EBITDA of $3.4 million assuming approximately $5 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. The transaction is subject to customary closing conditions and is expected to close on February 8th, 2021.

Vitner's, established in 1926, is an iconic brand in the Chicago area and its approximately 55 DSD routes will provide Utz a strengthened foothold in Chicago and the Midwest from which to further grow the presence of its Power Brands, which include Utz®, On The Border®, Zapp’s®, Golden Flake®, Good Health®, Boulder Canyon®, Hawaiian® Brand, and Tortiyahs!® ("Power Brands").

Following the acquisition, Vitner’s potato chips, cheese snacks, corn snacks and popcorn will move Utz from the #7 position to the #4 position among salty snacks in the Chicago market, the fourth largest salty snack market in the U.S. at approximately $688 million in annual retail sales for the 52 weeks ending November 29, 2020 according to IRI. Most of Vitner’s products are currently manufactured by Snak King, but Utz plans to transition manufacturing of most of those products to its own manufacturing plants after closing, further increasing utilization of Utz’s manufacturing network.

Dylan Lissette, CEO of Utz:
 

"This strategic acquisition will make Utz a more significant competitor in the Chicago area. Combined with our recently announced acquisition of the On the Border® tortilla chip, salsa and queso brand, we create a strong brand platform to better serve the primary salty snack channels and continue to expand rapidly in this important growth market."

"This transaction is a continuation of our strategy to successfully build long-term value and share by expanding in major metropolitan areas, like we did in New York City in 1994, Boston in 2004, Pittsburgh in 2006 and Atlanta in 2011. This acquisition strengthens our competitive position and will be a spark for continued growth in the Midwest. We are confident this transaction will drive long-term value creation for our shareholders and help position Utz for continued long-term growth."

Barry Levin, CEO of Snak King:
 

"We are thrilled to see the Vitner’s brand, established almost 95 years ago, become part of the Utz Brands, Inc. platform. Utz will be able to leverage its world-class family of brands and expertise in DSD operations to help Vitner’s continue to serve the Chicago market."

Strategic Rationale

The Chicago market is the fourth largest salty snack market in the U.S. with approximately $688 million in annual retail sales, and it grew approximately 9% for the last 52 weeks ended November 29, 2020 according to IRI. Vitner's 55 DSD routes provide an efficient, immediate route to market to further grow Utz's Power Brands in the grocery, drug, and up-and-down the street channels in the Chicago metropolitan and Northwest Indiana areas.

The transaction is complementary to (i) Utz’s existing primary Chicago route to market established in partnership with a third party distributor partner that primarily focuses on large grocery store chains and (ii) Utz’s acquisition of Kitchen Cooked and its Central Illinois to Eastern Iowa-based distribution assets in December of 2019.

The addition of Vitner’s potato chips, cheese snacks, corn snacks and popcorn, combined with Utz’s recently-announced acquisition of the On the Border® tortilla chip, salsa, and queso brand, would improve Utz’s share of the $1 billion retail sales Illinois salty snack market to 4% for the last 52 weeks ended November 29, 2020 according to IRI, up five-fold since the end of calendar year 2016. Increasing Utz’s sales in the large and growing Chicago area is an important step to capture the future growth opportunity in the Midwest.

Compelling Financial Benefits

Vitner’s generated net sales of $25.0 million and Vitner’s Pro Forma Adjusted EBITDA of $3.4 million for the last twelve months ended September 27, 2020. The acquisition will provide a platform from which to increase the sales of Utz’s Power Brands, and it will increase the utilization within Utz’s manufacturing network by transitioning production of most Vitner’s products into Utz’s plants over a transition period.

In addition, Utz expects to receive a tax basis step up from the acquisition of intellectual property associated with the VITNER’S® trademark with an estimated net present value of approximately $5 million. The transaction is expected to be accretive to earnings in 2021 and beyond.

Transaction Details

Under the terms of the transaction agreement, Vitner’s assets will be acquired by UQF. The Company expects to use cash on its balance sheet to fund the transaction. The transaction does not have a meaningful impact to Utz’s net leverage ratio.

The Company has posted presentation slides that are available now on Utz’s Investor Relations website.

Advisors

Cozen O’Connor is serving as legal counsel to Utz Brands, Inc. Sheppard Mullin is acting as legal counsel to Snak King.