Is B&G (BGS) Eyeing Mazola Cooking Oil Maker ACH Food?

Snack food company Parsippany, NJ-based B&G Foods Inc (NYSE:BGS) plans to acquire Mazola cooking oil maker ACH Food Companies Inc. from food supplier and retailer Associated British Foods (LON:ABF) Plc, as per media reports.

Although both the parties refused to comment, Associated British Foods has appointed investment bank Moelis & Co for the transaction which is expected to value ACH Food in between $300 million and $400 million, if media reports are to be believed.

London-based Associated British Foods recently announced that the weaker pound post Brexit should bolster its results in fiscal 2016. However, Associated British Foods warned that the currency fluctuation will hurt profit margins in fiscal 2017. Its pension plan will fall into the negative territory, partly due to Brexit-induced currency pressure.

On the other hand, ACH Food took over the Mazola business, along with Argo and Kingsford's corn starch, Karo and Golden Griddle syrups, Henri's salad dressings, and a number of related Canadian Brands, from Unilever (LON:ULVR) Plc in 2002 for $360 million in cash.

B&G Foods and its subsidiaries manufacture, sell and distribute a diversified portfolio of high-quality, shelf-stable foodstuff. The company acquired Green Giant frozen foods and Le Sueur canned vegetable brands for about $765 million in 2015 and thereby expanded its distribution network and forayed into the frozen food space.

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Now, with the acquisition of ACH Food, the company will bolster its presence in the shelf-stable product market. B&G Foods already sells staples like Mrs. Dash salt-free flavoring and Vermont Maid syrups.

Notably, B&G Foods’ second-quarter 2016 revenues increased 58.2% year over year driven by strong sales of the Mama Mary’s brand, acquired in Jul 2015, and Green Giant acquired in Nov 2015. Net sales contribution from Mama Mary’s brand was $8.9 million and that from Green Giant was $107.2 million during the quarter. Hence, it is clear that the company’s inorganic efforts are helping it register sales growth.

B&G Foods has also raised its fiscal 2016 outlook for adjusted EBITDA and earnings. The Green Giant acquisition (acquired in Nov 2015 from General Mills (NYSE:GIS), Inc.) resulted in better-than-expected profits in the first and second quarters of 2016, which encouraged management to raise the outlook. The Green Giant integration is under process and is on track to be completed in the third quarter of 2016.

B&G Foods carries a Zacks Rank #3 (Hold). Better-ranked stocks in the consumer staples space include Omega Protein Corporation (NYSE:OME) , TreeHouse Foods Inc. (NYSE:THS) and The Kraft Heinz Company (NASDAQ:KHC) . While Omega Protein sports a Zacks Rank #1 (Strong Buy), TreeHouse Foods and Kraft Heinz carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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