United Natural Foods, Inc. (NASDAQ:UNFI) has completed the acquisition of Haddon House Food Products, Inc., which was announced in late-February.
The company has acquired all the outstanding shares of Haddon House and some affiliated entities apart from some real estate. Haddon is a distributor and merchandiser of natural and organic and gourmet ethnic products throughout Eastern United States.
The acquisition was funded with borrowings under the company's revolving credit facility. The final purchase price was subject to a customary post-closing net working capital adjustment.
With this buyout, the company will gain greater operating scale and resources to further develop its product and service offerings.
As a result of the deal closure, Haddon will operate as a wholly owned subsidiary of United Natural. However, it would continue to function as Haddon House Food Products, Inc., which was established in 1960 by the Anderson family. The transaction is expected to be accretive to the company’s earnings in fiscal 2017.
United Natural has been pursuing acquisitions over the years to grow its distribution network, customer base and boost long-term growth.
Last month, this specialty foods distributor announced the acquisition of all the outstanding shares of Nor-Cal Produce, Inc. and an affiliated entity as well as certain real estate, for approximately $68.6 million. Nor-Cal is a family owned and operated distributor of conventional and organic produce and other fresh products in Northern California, with primary operations located in West Sacramento, CA.
The acquisition will provide United Natural a national presence and would help expand its existing produce operations. The transaction is expected to be accretive to the company’s earnings in fiscal 2017.
The acquisition of Tony’s Fine Foods (in Jul 2014), a specialty distributor of perishable food products, helped the company expand both its high-growth perishable product offerings as well as distribution footprint in western U.S. The company’s revenues in 2015 benefited significantly from the buyout.
Its major acquisition was that of Minnesota-based Trudeau Foods in Sep 2013. Trudeau Foods is a distributor of specialty perishables and dry products. The acquisition helped the company to enter the markets of Minnesota, North Dakota, Wisconsin and Michigan’s Upper Peninsula.
Though encouraged by acquisitions and consumers’ increasing demand for organic products, driven by a healthy lifestyle, food safety and environmental sustainability, we cannot ignore the fact that the company has been struggling due to persistently weak gross margin over the past few quarters. This is due to a shift in customer mix to lower-margin supermarkets channel. Unfavorable currency is an added woe.
In such a scenario, the company’s efforts to look for further opportunities seems to be a good way to enhance its position in the natural and organic industry in the U.S. and Canada and gain traction in the specialty products space.
United Natural has a Zacks Rank #2 (Buy). Other well-positioned players in the food industry include Post Holdings, Inc. (NYSE:POST) , B&G Foods, Inc. (NYSE:BGS) and Campbell Soup Company (NYSE:CPB) . While B&G Foods and Post Holdings sport a Zacks Rank #1 (Strong Buy), Campbell Soup holds a Zacks Rank #2 (Buy).
UTD NATURAL FDS (UNFI): Free Stock Analysis Report
CAMPBELL SOUP (CPB): Free Stock Analysis Report
B&G FOODS CL-A (BGS): Free Stock Analysis Report
POST HOLDINGS (POST): Free Stock Analysis Report
Original post
Zacks Investment Research