Report: Utz heading toward $1B deal

Dive Brief:

  • Snack maker Utz Quality Foods is in talks to be acquired by Collier Creek Holdings, a blank check company, Bloomberg reported, citing people close to the matter. A blank check company is created after raising funds with the goal of merging or acquiring another business.
  • A deal would value the maker of chips and pretzels at more than $1 billion, including debt. A transaction could be reached as soon as this month, the wire service said. A potential combination with Collier Creek​, ​started by former Blackstone Group executives, has been ongoing since before the coronavirus outbreak.
  • On its website, Utz, which began selling potato chips in 1921​, describes itself as “the largest independent privately held snack brand in the U.S.”

Dive Insight:

While talks between Utz and Collier Creek have reportedly been ongoing for months, the current business climate couldn’t be more ideal to maximize the value of the maker of its namesake potato chips, TGI Fridays potato skin chips and Snyder of Berlin pretzels.

What’s more, Collier Creek raised $440 million in its IPO in October 2018, with a focus on buying consumer goods and related businesses. Its founders include former Pinnacle Foods chairman Roger Deromedi, who no doubt is familiar with snacking and the competitive CPG space during his time in the industry.

Snacking has become a popular method of eating for consumers who are busy and on the go. It’s now an all-day practice in the U.S., with salty snacks becoming particularly popular between meals and as a meal replacement, an Innova Market Insights report found last year. And according to a study Mondelez conducted with the Harris Poll​ in 2019, snacking is preferred to eating meals for 59% of adults worldwide. For millennials, that figure jumps to 70%.

With its portfolio of conveniently packaged salty snacks, Utz has a suite of brands that consumers could easily eat while at work, running errands on the weekend or as a late-night treat.

As consumers spend more time at home because of the pandemic, many people have slowed down their pace of activity, but demand for snacks has increased. According to statistics from Nielsen, sales of salty snacks were up almost 25% above last year during the last week in April. Since March, sales of potato chips have been up 24.2% over 2019.

In many cases, consumers are turning to comfort foods that make them feel good. Chips, cheese balls and other items no doubt included on this list. In fact on its website, Utz tells consumers that their order could be delayed “due to high demand and product shortages.” 

A deal with a blank check company is hardly unusual in food. Hostess Brands, which is now publicly traded, was acquired through this type of investment vehicle in 2016, four years after it exited bankruptcy. TGI Fridays was set to be purchased by a blank check company before the coronavirus ultimately scuttled a deal for the casual restaurant chain. Smoothie chain Jamba Juice came public more than a decade ago through a blank check.

Bloomberg reported investor Warren Buffett said in 2015 he once considered buying Utz. It’s no surprise, with snacking companies serving as popular acquisition targets in recent years. 

Campbell Soup doled out nearly $5 billion in 2017 for Snyder’s-Lance, the maker of Cape Cod potato chips and Pop Secret popcorn. Hershey purchased Amplify Snack Brands, parent company of SkinnyPop, for $1.6 billion. It also acquired snack maker Pirate Brands. Both Snyder’s-Lance and Amplify were the biggest deals in each company’s history.

There have been countless other acquisitions involving smaller brands, such as Conagra Brands adding ready-to-eat popcorn brand Angie’s Boomchickapop and manufacturer of Duke’s meat snacks and Bigs sunflower seeds Thanasi Food to its portfolio.

Even Utz has been a strategic buyer. Utz purchased Inventure Foods — owner of TGI Friday’s products, Tato Skins and Nathan’s Famous licensed brands — for $165 million three years ago. Last October, Utz closed a deal to buy Conagra Brands’ direct-store delivery snacks business. And last year, Utz closed a merger with Kitchen Cooked, a maker of snack food brands like potato chips, Kettle Kurls, Kettle Pops, popcorn and pretzels.

Now, it looks like Utz may be finding itself on the other end of a deal. With the popularity of snacking at an all-time high, this deal could strike while the iron is hot. 

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