Packaging

Flowers Foods and Tasty Baking Company Announce All Cash Merger Agreement

Monday 11. April 2011 - Tastykake will strengthen Flowers' snack cake business and geographic reach

Flowers Foods (NYSE: FLO) (“Flowers”) and Tasty Baking Company (NasdaqGM: TSTY) (“Tasty”) today announced a definitive merger agreement whereby Flowers will acquire all of the outstanding shares of Tasty common stock for $4.00 per share in cash for a total purchase price of approximately $165 million, including Tasty’s existing indebtedness.
The transaction is expected to:
— Strengthen Flowers’ snack cake business through the addition of the
iconic Tastykake snack cake brand;
— Expand Flowers’ geographic reach, immediately adding more than 24
million consumers who are contiguous with Flowers’ current footprint;
— Add two highly efficient bakeries with additional capacity to support
growth;
— Generate significant operating synergies through additional revenue and
cost-saving opportunities;
— Add approximately $115 million to $125 million to Flowers’ 2011 sales,
contribute approximately $10 million to $12 million to Flowers’ 2011
EBITDA, and be neutral to slightly accretive to 2011 earnings per share,
excluding one-time costs of the transaction; and
— Contribute approximately $210 million to $225 million to Flowers’ 2012
sales, contribute approximately $25 million to $30 million to 2012
EBITDA, and contribute approximately $.06 to $.09 per diluted share.
Under the terms of the agreement, Flowers will commence a tender offer to acquire all of the outstanding shares of Tasty common stock for $4.00 per share in cash. The transaction is expected to close during the second quarter of 2011 and is subject to customary closing conditions and approvals, as well as a majority of the outstanding shares of Tasty common stock being validly tendered and not withdrawn in the tender offer. The agreement has been unanimously approved by the Boards of Directors of both companies. Flowers intends to fund the transaction through cash-on-hand and credit facilities. There is no financing condition to the offer. Upon completion of the transaction, Tasty will become part of Flowers’ direct-store-delivery segment.
“We are very pleased with the addition of Tasty to Flowers,” said George E. Deese, Flowers Foods’ Chairman and CEO. “Tasty brings a talented, committed team of employees, two highly efficient bakeries, the iconic Tastykake brand, a solid sales base, and an effective distribution system. The merger will expand Flowers’ geographic reach and bring new consumers, new customers, and new opportunities for further growth. It will provide the opportunity to add Tastykake products to Flowers’ existing direct-store-delivery network. With the addition of Tasty, our snack cake business will be significantly enhanced and we will have a new platform to grow our Nature’s Own brand as we make other acquisitions that add needed production capacity for breads, buns, and rolls.
“Tasty and Flowers have a similar heritage and share the same core values of integrity, service, quality, and commitment,” Deese continued. “We are delighted to welcome Tasty’s 740 dedicated employees and 413 independent sales distributors to the Flowers Foods family. Our plans are to invest in the combined business for sustainable and profitable growth, and they will be an important part of Flowers’ ongoing success.”
Charles P. Pizzi, Tasty’s President and CEO, said, “This merger with Flowers will create value for Tasty’s shareholders, employees, and the Philadelphia community. It will provide immediate cash value to our stockholders at an attractive premium over the current trading value. We believe the combination of Tasty with Flowers will create a company with long-term advantages for our employees, customers, suppliers, independent sales distributors, and other constituents. Flowers also shares Tasty’s commitment to the communities in which it operates. We have a deep respect for Flowers’ approach to managing its business and employees, and we look forward to working closely with the Flowers team to complete the merger as quickly as possible and to ensure a smooth transition.”
Expected Benefits of the Flowers and Tasty Combination
The combination of Flowers and Tasty leverages their complementary product offerings and market strengths and unites two companies with rich traditions of delivering quality and value to their customers and consumers. This combination is expected to result in:
— Creation of a larger business with a complementary portfolio of
high-quality branded and store-brand bakery products;
— A deeper penetration of the snack cake category, which should strengthen
customer relationships over a broader geography;
— The ability to grow the Tastykake brand in its current markets and
provide new opportunities for Tastykake’s independent sales
distributors;
— The opportunity to expand distribution of the Tastykake brand through
the majority of Flowers’ 4,000 independent distributors, whose existing
territories have access to 53 percent of the U.S. population;
— The addition of two highly efficient bakeries strategically located in
the heart of the Northeast corridor. The available snack cake capacity
in these state-of-the-art facilities provides a platform for further
profitable growth;
— The immediate addition of approximately 24 million consumers who are
contiguous to Flowers Foods’ existing geographic footprint, which will
increase Flowers’ market access to about 61 percent of the U.S.
population through its direct-store-delivery systems;
— The potential to expand the reach of Flowers’ Nature’s Own brand through
Tasty’s marketing areas as Flowers continues to expand and acquire
additional production capacity for bread, buns and rolls; and
— A strong, combined financial profile, with an anticipated sales
contribution from the transaction of $115 million to $125 million for
2011, contributing approximately $10 million to $12 million to EBITDA
with the effect on 2011 earnings per share expected to be neutral to
slightly accretive, excluding any one-time expenses. In 2012, we
anticipate Tasty to contribute approximately $210 million to $225
million to sales with an expected $25 million to $30 million EBITDA
contribution and anticipate the transaction to be accretive
approximately $.06 to $.09 per diluted share.
“We take a very deliberate approach to selecting acquisitions, focusing on strong brands and premium products that extend our capabilities and geographic reach. We believe Tasty is highly consistent with our acquisition strategy and also offers substantial synergy potential that we expect will generate a strong financial return for our shareholders,” said Deese.
Flowers has experience integrating acquisitions, having completed more than 100 acquisitions since listing publicly in 1968, including 11 in the past decade. Upon the completion of the tender offer and subsequent merger, Flowers and Tasty will work closely to achieve a successful integration and to realize the benefits of the transaction.
“We simply could not be more excited about the opportunities this merger holds for our company.
Throughout its history, Tasty Baking Company’s products have set the industry benchmark for consistent taste, quality, and freshness, and with our tradition of superior service, our customers have come to know and trust the iconic Tastykake brand.
“Flowers is a tremendous company. Having been in business since 1919, Flowers has become a leader in the baking industry. Our two great companies each enjoy a rich heritage and share many of the same values. In fact, both companies are guided by the same four principles: integrity, service, quality, and commitment; both proudly support and celebrate the communities we serve.
We’re excited that the agreement will extend the distribution of Tastykakes into many new markets leveraging Flowers’ direct-store-delivery network. Equally important, this merger ensures that Tastykakes will continue to be made by Philadelphians in Philadelphia.”
– Statement attributable to Charlie P. Pizzi,
President & CEO
Tasty Baking Company
“This is exciting news for both Tasty Baking Company and Flowers Foods. Tasty is an outstanding company with great people, highly efficient facilities, a solid sales base, an outstanding distributor network, and an iconic brand. Working together, we can take advantage of many growth opportunities in the baking arena.
“Like Tasty, Flowers has been in business since the early 1900s. We know the baking business, we’re a solid company with a leading brand in Nature’s Own, and we are committed to our customers, consumers, and communities. We recognize the importance of Tastykake to Philadelphia and look forward to helping to grow and build the Tastykake brand nationally.
Our mission is to increase the value of our company to shareholders over the long-term. We do that by working “the Flowers Way.” We invest in our company, we deliver outstanding service to our customers, we grow our business, and we appreciate and foster our team and their professional goals. Because of our similarities and shared core values, we believe Tasty will be a wonderful addition to Flowers Foods.”
– Statement attributable to Allen L. Shiver,
President
Flowers Foods, Inc.