Lassonde Industries (LAS-A) M&A Announcement summary

Deal rationale and strategic fit

• Acquisition nearly doubles specialty food presence and expands U.S. reach, supporting ambitions to become a larger, diversified North American food and beverage player and aligning with the goal to reach $3B in sales by end of 2026.

• Enhances position as a manufacturer of choice for retort-based products and provides access to premium and sugar-free sauce categories, including premium tomato-based sauces.

• Adds brands with growth potential, such as G Hughes, Gia Russa, and Little Italy in the Bronx, positioned in premium and health-oriented segments.

• Complements existing private label business with a strong branded portfolio, creating cross-selling and revenue synergy opportunities in both U.S. and Canadian markets.

• Both companies share similar cultures and values, supporting a smooth integration.

Financial terms and conditions

• Purchase price is US$235 million on a debt-free, cash-free basis, with up to US$45 million in earn-outs over three years if financial targets are met.

• Summer Garden generated US$148 million in sales and US$27.9 million adjusted EBITDA (18.9% margin) for the 12 months ending May 2024.

• Transaction multiple is 8.4x trailing EBITDA, or 7.3x when factoring in a US$30 million tax benefit from asset deal treatment.

• Financed mainly through available credit facilities; pro forma net debt to EBITDA ratio expected to be less than 2.2x at closing.

• No financing condition is attached to the transaction.

Synergies and expected cost savings

• Synergies identified on sales, efficiency, and cost sides, but not yet quantified; deal stands on its own merits without synergy consideration.

• Revenue synergies expected from cross-selling brands in Canada and leveraging customer relationships in both countries.

• Integration of systems and leveraging expertise at the Boardman, Ohio facility anticipated to drive operational efficiencies.

• Transaction expected to be accretive to margins and earnings even before considering synergies.

• Lassonde anticipates tax deductibility benefits of approximately US$30 million (net present value).