The transaction brings together Snyder's, a global leader in pretzels and a U.[image-nocss] S. leader in specialty snacks, with Lance, a U.S. snack food leader in sandwich crackers, potato chips and cookies.
The combined company will have a well-established portfolio of snack food brands that includes Snyder's of Hanover, Lance, Cape Cod, Grande, Tom's, Jays, O-Ke-Doke, Stella D'oro, Krunchers!, Archway, Naturals as well as Lance Private Brands, a leader in private-label cookies and crackers. Products will include pretzels, sandwich crackers, potato chips, cookies, tortilla chips and nuts.
"This transaction allows us to create a stronger company in a highly competitive industry and simultaneously create value for our shareholders. Snyder's-Lance will have a broad array of leading snack food products supported by a strong national DSD system," said David V. Singer, president and CEO of Lance.
"We are extremely pleased with the opportunity to combine two leading snack food companies in such a strategically compelling merger. 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," said Carl E. Lee Jr., president and CEO of Snyder's.
"This historic transaction combines 200 years of excellence in salty snacks and baking and will create a dynamic and competitive organization able to deliver long-term value to shareholders and a superior customer service experience, while continuing to be an important contributor to the communities in which we operate," said Michael A. Warehime, chairman of Snyder's.
"The initiatives that we have been working on for the last few years have positioned us for this opportunity, which will create a company with nationwide distribution, a culture of customer service, and an excellent portfolio of snack food brands, products and capabilities," added Singer.
"Snyder's national distribution, national advertising and market presence will be used to support our new broader portfolio of products," added Lee.
Snyder's-Lance will draw on an experienced and talented group of leaders from both companies. Michael A. Warehime, current Snyder's chairman, will serve as chairman of the combined company, and W. J. Prezzano, current Lance chairman, will serve as lead independent director.
David V. Singer, current Lance president and CEO, will become CEO of Snyder's-Lance. Carl E. Lee, Jr., current Snyder's president and CEO, will become president and COO, and Rick D. Puckett, current Lance executive vice president and CFO, will become executive vice president and CFO of the combined company.
Snyder's-Lance will have a 16-member board drawn primarily from the existing boards of both companies. It will be comprised of eight directors of the current Lance board and seven directors of the current Snyder's board. An additional independent director will be elected by the new board immediately after closing.
The company will have corporate headquarters in Charlotte, N.C., and additional headquarters in Hanover, Pa., where certain key leaders and functions will continue to be located.
The combined company will have the operating scale and balance sheet strength to provide even more value to consumers, customers and shareholders.
Lee said, "We will be driving to unlock the significant value opportunity presented to our shareholders. We believe there are opportunities to drive revenue growth in the combined company given its national DSD footprint. In addition, we believe there are significant synergies available in areas including purchasing, production, distribution and other areas."
Snyder's-Lance will have pro forma combined net sales of approximately $1.6 billion, adjusted EBITDA of approximately $170 million, presynergies and strong free cash flow for the 12-month period ended June 26, 2010. The combination is expected to generate more than $30 million in annualized synergies. The transaction is not expected to materially impact standalone Lance earnings in 2010, excluding special items, but will add incremental earnings per share of more than 10%, on a fully synergized basis.
Puckett noted, "Snyder's-Lance will have a strong balance sheet with a total debt to adjusted EBITDA ratio of approximately 1.6x, pre-synergies, and will generate significant free cash flow. This cash flow will be utilized to invest in opportunities to further increase value for shareholders going forward. We believe there are significant opportunities for our new company to grow organically and through acquisitions."
Under the transaction terms, shareholders in Snyder's and Lance will each own approximately 50% of the new company after the merger. Existing Lance and Snyder's options will become options in the combined Snyder's-Lance. Additionally, contingent on the closing of the transaction, existing Lance shareholders will receive a one-time $3.75 special cash dividend. The principal shareholders of Snyder's have agreed to vote in favor of the merger. The board for both companies has unanimously recommended the approval of the transactions to their shareholders.
The proposed merger, which is intended to be structured as a tax-free exchange of shares, is subject to approvals by the shareholders of the companies, regulatory approvals, as well as customary closing conditions.
The merger is expected to close following shareholder meetings for both Lance and Snyder's in the fall of 2010.
Wells Fargo Securities acted as transaction advisor to Lance and Snyder's. BofA Merrill Lynch rendered a fairness opinion to the board of Lance.
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