In a bid to reduce debt and cut expenses, Hanover-based Utz Brands is unloading some of its snack brands and plants, including a facility in the Lititz area.
In a deal valued at $182.5 million, the snack maker is selling plants in Manheim Township and Littletown, N.C. as well as the lease for a plant in Las Vegas, Nevada, according to a press release.
Utz also is selling its Good Health and R.W. Garcia snack brands, which together accounted for about $65 million in sales last year.
Good Health makes healthy snacks like veggie chips and veggie sticks. R.W. Garcia makes organic tortilla chips, crackers and corn chips.
The buyer is Our Home, a food company based in Boonton, New Jersey, active in the so-called “better for you” snacking category. Its existing brands include Food Should Taste Good and Popchips.
The deal is expected to close Feb. 5.
Why is this happening: Utz is hoping to pay off debt more quickly and streamline its supply chain.
The company paid interest of $15.5 million for the 13 weeks ending Oct. 1, up from $11.6 million for the year-ago quarter.
After applying the anticipated sale proceeds of $150 million to its debt, Utz expects to shave $15 million a year in interest costs. The company also hopes to trim $45 million in supply chain costs this year.
“With this important step in the optimization of our supply chain and brand portfolio, together with immediate benefits to free cash flow from lower interest expense, we are well-positioned to execute against our expansion plans across the U.S. and deliver on our margin target,” Utz CEO Howard Friedman said in a statement.
The latest moves come about four months after the snack maker announced plans to close a factory in its hometown, build a new warehouse there and sell three other plants.
What’s next: Our Home is expected to continue operating the plants it is buying from Utz and hire the employees working there.
“In addition, Our Home is keeping pay rates and PTO allotments the same, honoring job tenure, and offering similar benefits,” said Utz spokesperson Kevin Brick.
The two companies also plan to continue manufacturing certain of each other’s products under reciprocal co-manufacturing agreements.
The numbers: Utz has seen sales growth slow over the past year.
The company has not reported final results for 2023 but expects sales to grow between 2% and 2.2% for the year, down from 19.3% in 2022.
Sales may actually shrink by 0.2% to 1.3% for the fourth quarter of 2023, the company estimates.
Last December, the company unveiled a three-year plan to increase sales, boost profits and shrink debt.
The background: Founded in 1921, Utz was a family-owned business until September 2020, when it became a publicly traded company.
The company has grown through organic sales but also through a series of acquisitions, some of which were fueled by debt.
Utz purchased R.W. Garcia in November 2021 for $56 million.
Utz acquired the Manheim Township plant when it bought the former Keystone Pretzel Bakery in 2015.
Utz bought Good Health in 2014.
