Irish Firm Snarfs Up Otis Spunkmeyer

Will pay $340 million plus for baked goods company

SAN LEANDRO, Calif. -- IAWS Group PLC, Dublin, Ireland, has signed an agreement to acquire Otis Spunkmeyer Holdings Inc. from the private equity firm of Code Hennessy & Simmons LLC, Chicago, and the current management team of Otis Spunkmeyer.

Otis Spunkmeyer makes frozen cookie dough, prebaked cookies, along with packaged cookies, muffins, bagels, pastries, and brownies. It delivers its products to convenience stores, supermarkets, restaurants and foodservice distributors. It also sells to colleges and universities, drug stores, fundraising programs, [image-nocss] healthcare facilities, mass merchandisers, the military, school cafeterias and vending machine operators. In 2006 the company filed to go public.

Based on a closing enterprise value of $561 million, the consideration for the equity is approximately $340 million with an additional payment to stock and option holders contingent on the achievement of agreed performance milestones, up to a maximum of $25 million. The acquisition is being funded by additional debt facilities.

Otis Spunkmeyer has about $220 million of debt, according to a report by the Contra Costa (Calif.) Times.

The Otis Spunkmeyer brand has strong recognition and awareness across a national customer base in the foodservice and retail channels, the companies said.

The company has a flexible coast-to-coast supply chain to its 62,000 customers, offering direct delivery through 52 nationwide sales centers.

In addition to supplying prepared products for fresh baking, Otis Spunkmeyer also supports customers with ovens, merchandising, display cases and point of sale material. It has more than 55,000 ovens in use throughout the USA in both foodservice and retail outlets. The company operates four manufacturing facilities strategically located in California, Texas, South Carolina and Pennsylvania.

Otis Spunkmeyer generated revenue of $336 million for the year ended Dec. 31, 2005, EBITDA of $48 million and operating profit of $29.1 million. From 2001 to 2005, it achieved a net sales compound annual growth rate in excess of 9%. Total assets (excluding goodwill and intangibles), at acquisition will be $50 million.

Otis Spunkmeyer has a strong presence in a niche growth segment of the bakery market that is complementary to IAWS' existing La Brea Bakery business. In the year to July 2006, La Brea Bakery increased sales by over 26% and is a major U.S. artisan bread brand.

The group will now have a major brand presence in two niche growth segments of the specialty bakery market. The acquisition will increase IAWS' U.S. sales by 200% to more than $530 million, bringing scale to these operations.

It is expected that the acquisition will be earnings enhancing for IAWS from the date of completion, which is scheduled for the end of October 2006.

John Schiavo, who has been CEO of the business since 1996, will remain with the business, as will the rest of the current senior management team.

Owen Killian, CEO of IAWS, said, The acquisition is an excellent fit and offers IAWS a strong platform for future growth in the U.S. market.