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Lance And Snyder's Of Hanover Combine

Fri, 07/23/2010 - 4:31am


RALEIGH, N.C. (AP) — Sandwich cracker maker Lance Inc. and privately held pretzel maker Snyder's of Hanover said Thursday they plan to combine into the country's No. 2 producer of salty snacks after Frito-Lay.

Details of the deal were not disclosed. The all-stock transaction would leave Snyder's shareholders with 50.1 percent and Lance shareholders 49.9 percent of the combined company, to be called Snyder's-Lance Inc.

Lance shareholders would also receive a $3.75 special cash dividend at the close of the combination, which is set for fall if shareholders and regulators approve it.

"Combining our strengths in salty, cracker and cookie snacks creates the opportunity to be a focused specialty company with the scale to compete in high volume categories," Snyder's Chief Executive Officer Carl Lee Jr. said. "Snyder's national distribution, national advertising and market presence will be used to support our new broader portfolio of products."

The new company will be based in Charlotte, N.C., Lance's hometown, with additional executive offices in Hanover, Pa., where Snyder's is based.

Last fall, federal regulators reportedly turned back Snyder's attempt to buy out competitor Utz Quality Foods Inc., also privately held and based in Hanover, Pa.

The snack-food makers had combined revenue of about $1.6 billion in the year that ended June 26, with operating earnings of about $170 million, the companies said. Lance said Thursday that it expects net revenue between $930 million and $950 million for 2010.

The companies said they will be able to improve performance by more than $30 million once they combine.

That's a conservative estimate, said BB&T Capital Markets analyst Heather Jones, who upgraded her rating on Lance's stock from "hold" to "buy." It had become increasingly obvious in the past year that Lance was having a hard time expanding sales, in part because of its "modest share position in the salty snack aisle," Jones said in a note to investors.

The merger with Snyder's "provides a strong nationwide platform from which to grow the combined company," she said.

The combination also "opens up significant revenue growth opportunities to drive higher revenue and earnings performance," said Jefferies & Co. analyst Scott Mushkin, who also upgraded Lance stock to "buy."

Lance, founded in 1913, is best known for crackers sandwiched around a layer of peanut butter or cheese. It also produces Cape Cod potato chips, Archway cookies and Stella D'oro Italian baked goods.

Lance announced Thursday its second-quarter net income rose to $12.2 million, or 38 cents per share, from $9.5 million last year.

Shares soared more than 34 percent to $21.50 in afternoon trading on the Nasdaq exchange.

The companies said their manufacturing locations are complementary. Lance facilities are in Charlotte, N.C.; Burlington, Iowa; Columbus, Ga.; Hyannis, Mass.; Corsicana, Texas; Perry, Fla.; Ashland, Ohio, and Guelph, Ontario. Snyder's operates plants in Hanover, Pa.; Jeffersonville, Ind.; and Goodyear, Ariz.

Lee is to be the new company's president and chief operating officer, while Snyder Chairman Michael Warehime, a member of one of the company's founding family, would be its chairman. Lance CEO David Singer will become chief executive of Snyder's-Lance.

The combined company's 16-member board is to include eight current Lance directors including current Lance chairman W. J. Prezzano, seven Snyder board members and one independent director to be elected by the new board after the merger closes.

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