Hershey’s is taking another bite out of the snack set, announcing on Wednesday the acquisition of the Pirate Brands business from B&G Foods for $420 million. The portfolio of brands, which includes Pirate’s Booty, Smart Puffs and Original Tings, is another step by Hershey to broaden its offerings, moving further afield from confection and deeper into the snack aisle.
The transaction will be financed with cash on hand as well as with short-term borrowing, and is expected to close in the fourth quarter of the year. B&G said that it intends to use the proceeds from the sale for the repayment of long-term debt and potential future acquisitions.
Pirate Brands will operate under Amplify Snack Brands in Hershey’s new better-for-you snacking “hub” located in Austin. Hershey’s has quickly added to its snack portfolio over the last few years, purchasing Krave jerky, snacking chocolate Bark Thins, and most recently Skinny Pop maker Amplify Snack Brands for more than $920 million. In a release, the company noted that its emerging brands unit is focused “on driving growth in the warehouse snacking aisle with unique product flavors and forms.”
Given its recent performance, especially with its flagship brand, Pirate Brands’ would seem to bring revenue to the group’s offerings. Hershey’s said that Pirate’s Booty has seen retail sales increase over 8 percent on a year-over-year basis and valued the overall cheese puff category at $2.5 billion.
“Pirate’s Booty is a leading cheese puffs brand loved by moms and kids as a better-for-you treat,” Mary Beth West, chief growth officer at Hershey , said in a release. “We expect the full Pirate Brands portfolio to be a great fit for Hershey’s growing Amplify business which is targeted toward consumers who are looking for great-tasting snacks without compromise.”
Hershey CEO Michele Buck told analysts earlier this year that she hoped to capture more snacking occasions through a broader portfolio of brands. With the addition of Pirate Brands, Hershey picks up one of the most recognizable salty snack companies targeted to families and children. Like Skinny Pop, it’s also a business that has seen success in club and mass retailers, but is still able to operate in the natural channel — a space Hershey’s traditional confectionary brands have not tapped. However, despite its sales growth, in recent years Pirate’s has seen increased challengers from new entrants, including CAVU backed Hippeas, as well as from private label offerings.
The brand was founded by Rob Ehrlich in 1987. After investment from a post-Vitaminwater Mike Repole and VMG Partners, Pirate’s was sold to B&G in 2013 for $195 million. At the time, Pirates was only the second addition to B&G’s snack portfolio. The company picked up snack brand Back to Nature roughly a year ago for $162.5 million.
At the time of the acquisition of Pirate’s, B&G noted that it believed the brand would generate net sales of $80 million to $90 million. In a release today, Robert Cantwell, president and CEO of B&G, said that the company had “more than doubled” the value of the business in the last five years.
Given the return on investment, B&G heralded the sale as an example of its M&A strategy. The hope, Cantwell said, is that by reducing the company’s leverage it will be better positioned for future acquisitions.
“The transaction we are announcing today is a great example of our ability to create meaningful shareholder value through accretive M&A by acquiring and investing in on-trend food brands,” Cantwell said in a statement. “One of my biggest goals as CEO has been to ensure that B&G Foods remains ready and able to continue our acquisition strategy.”
Meagan McGinnes contributed to this report.