Utz Brands to sell certain assets to Our Home for $182.5M

Utz Brands announced that certain of its subsidiaries including Utz Quality Foods, have entered into a definitive agreement for the sale of certain assets and brands to Our Home. Under the agreement, affiliates of Our Home have agreed to purchase the Good Health and R.W. Garcia brands, the Lincolnton, North Carolina, and Lititz, Pennsylvania manufacturing facilities and certain related assets, and assume the company’s Las Vegas, Nevada facility’s lease and manufacturing operations. Following the close of the transactions, Utz and Our Home will operate under a transition services agreement for 12 months. The total consideration for the transactions is $182.5M, subject to customary adjustments, and the transactions are expected to close on February 5. In addition, post-closing, the parties will operate under reciprocal co-manufacturing agreements under which Our Home will co-manufacture certain Utz products and Utz will co-manufacture certain Good Health products. Certain Good Health products will continue to be distributed and sold on the Utz DSD network for Our Home. Our Home plans to continue to operate and grow the brands and manufacturing facilities under its platform while offering employment to Utz associates working in those facilities as part of the transition. The transactions are expected to provide approximately $150M in after-tax net proceeds, which Utz will use to pay down its long-term debt. The debt reduction is expected to lower interest expense by approximately $12M in FY24 based on the company’s current outlook for interest rates, and to accelerate the company’s plan for achieving its target of approximately 3.0x Net Leverage by a full year from the end of fiscal 2026 to the end of fiscal 2025. The company expects the impact of the transactions to be accretive to its adjusted earnings per share on a full-year basis in 2024, reflecting the foregone profit related to the Good Health and R.W. Garcia brands, and after factoring in the benefit of cost savings and the use of net proceeds from the sale to paydown long-term debt and reduce interest expense. Utz estimates that Good Health and R.W. Garcia-related products contributed approximately $65M in net sales for the fiscal-year ended December 31, 2023. In addition, at the company’s recent 2023 Investor Day, Utz provided fiscal 2026 financial targets that included targeted Supply Chain Network Optimization cost savings of approximately $45M to be achieved from 2024 through 2026. The company expects that the completion of these transactions will accelerate the timing of cost savings. Management will further discuss this impact, in addition to its fiscal year 2024 outlook, on its fiscal-year 2023 earnings conference call on February 29.