Quebec-based fruit juice processor Lassonde Industries plans to buy its way further into the U.S. juice market — this time in the branded juice business, with a play for a national-level manufacturer.
Lassonde and its founding family on Thursday announced an agreement to buy privately-held Apple + Eve, LLC of Port Washington, N.Y. for $150 million (all figures US$). The company expects to close the deal later this month, pending regulatory approvals and other closing conditions.
Operating since 1975, Apple + Eve makes and markets over 100 juice and drink products under brand lines including Apple + Eve, Organics, Fruitables, Quenchers, Waterfruits and Sesame Street. The company also owns and markets juices under the Northland, Seneca and The Switch brands.
“By joining Lassonde, we will remain highly focused on creating innovative, on-trend products under the iconic Apple + Eve brand and the other strong brands in our portfolio,” Apple + Eve CEO and founder Gordon Crane said in Lassonde’s release.
“Like Lassonde in Canada, Apple + Eve is synonymous with innovative products in the health and wellness segment in the U.S.,” Lassonde president Jean Gattuso said in the same release. “We are confident in our ability to continue to grow the brand.”
Entering the branded juice business in the U.S. “represents another major milestone in our North American strategy,” CEO Pierre-Paul Lassonde said in the same release.
Lassonde said the deal will provide “increased critical mass” and economies of scale to support U.S. customers, plus “a more diversified and balanced product portfolio in the U.S. and an entry point in national-brand products in the U.S. market.”
Apple + Eve, billed as the leading independent branded juice company in the U.S. books annual sales of about $190 million.
The deal, when closed, would see Lassonde get a 90 per cent equity interest in Apple + Eve while members of the Lassonde family — through their “existing equity interest” in the company’s acquiring U.S. subsidiary and a capital contribution to the company’s financing — will hold the remaining 10 per cent.
Out of the $150 million purchase price, $75 million would be financed under the term credit facility of a Lassonde U.S. subsidiary, $67.5 million would come from a combination of cash, cash equivalents on hand and Lassonde’s Canadian operating credit facility, and $7.5 million from an equity investment of members of the Lassonde family.
Lassonde, which operates 14 plants in Canada and the U.S., has become a major North American player in fruit and vegetable juices and drinks through brands including Everfresh, Fairlee, Flavur, Fruite, Graves, Oasis and Rougemont. It also makes store-brand ready-to-drink fruit juices and drinks in the U.S. and is a major producer of cranberry sauces.
Lassonde last month also boosted its stake in U.S. cranberry juice and sauce maker Clement Pappas and Co. to 90 per cent, up from 84 per cent previously. Lassonde Industries has owned a controlling stake in Pappas since 2011; members of the Lassonde family hold the other 10 per cent.
Lassonde’s proposal for Apple + Eve comes as North American fruit juice and drink makers struggle under what Lassonde described in May as ongoing “sluggish growth in demand.” [Related story]
“Recent acquisitions by major Canadian food retailers have also led to significant changes in the competitive landscape,” Lassonde noted in its first-quarter report in May, while declining carbonated drink sales are also affecting product pricing.
“When combined, these factors have led to increased competitive activities resulting in unstable selling prices and high levels of trade spending,” Lassonde said in May.
However, Lassonde said in May it “intends to remain active in seeking potential consolidation opportunities in the North American fruit juice and drink industry,” and that “barring any major external shocks, the company remains optimistic about its ability to slightly increase its consolidated sales in 2014” over 2013.
Lassonde in its Q1 booked profit attributable to shareholders of $7.09 million on $244.3 million in sales, up from $5.85 million on $240.6 million in the year-earlier period, but mainly on “favourable foreign exchange impact.” –– AGCanada.com Network