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COMPANY REPORT

Hershey and Amplify enter agreement; Former to acquire latter’s shares
Thursday, 28 December, 2017, 08 : 00 AM [IST]
Hershey
The Hershey Company and Amplify Snack Brands, Inc have entered into a definitive agreement under which the former will acquire all outstanding shares of the latter for $12 per share in cash.

“The acquisition of Amplify and its product portfolio is an important step in our journey to becoming an innovative snacking powerhouse, as together it will enable us to bring scale and category management capabilities to a key sub-segment of the warehouse snack aisle,” said Michele Buck, president and chief executive officer, The Hershey Company.

“Hershey’s snack mix and meat snacks products, combined with Amplify’s Skinny Pop, Tyrrells, Oatmega, Paqui and other international brands, will allow us to capture more consumer snacking occasions by creating a broader portfolio of brands,” she added.   

“Since Amplify’s inception in 2014, our company’s goal has been to bring transparency to our products, and clean ingredients and great tasting snacks to consumers,” said Tom Ennis, president and chief executive officer, Amplify Snack Brands, Inc.

“This transaction is a continuation of our mission, as Hershey also believes in bringing to consumers great-tasting snacks made with the best ingredients possible,” he added.

“Hershey is a great cultural partner for Amplify, and I am excited for our team who will have access to Hershey’s marketing and go-to market resources to take our brands to the next level,” Ennis said.

This strategic acquisition is expected to be accretive to Hershey’s financial targets given the growth trajectory and margin structure of Amplify’s key products.

Amplify’s brands compete in many attractive food categories that are capitalising on fast-growing trends in snacking with a focus on better-for-you products that deliver clean, simple and transparent ingredients as well as unique flavours and forms.

Additionally, this combination brings customers a known brand building partner that invests in category management solutions to drive higher levels of conversion and velocity at retail.

Under the terms of the agreement between Hershey and Amplify, Hershey has agreed to acquire all of the outstanding shares of Amplify Snack Brands, Inc for $12 per share, in a transaction structured as a tender offer followed by a merger, valued at approximately $1.6 billion, including net debt and including a make-whole payment of $76 million related to the tax receivable agreement (TRA).

Based on the previously-announced guidance, this represents a multiple of approximately 14.8 times the 2017 adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA), including identified annual run rate synergies of approximately $20 million expected to be generated over the next two years from cost savings and portfolio optimisation.

The transaction will be funded with cash on hand and new debt and is not expected to impact Hershey's current ratings.

Hershey expects the transaction to be accretive to adjusted earnings per share-diluted, including transaction related non-cash amortisation, in the first-year post closing with accretion increasing in year two.

Adjusted earnings per share-diluted accretion in both years is substantially higher when excluding transaction-related amortisation.

The acquisition is not expected to affect the previously announced full year 2017 outlooks provided in Hershey’s and Amplify’s third-quarter earnings release and conference calls.

The agreement has been approved by the boards of directors of both companies. Affiliates of TA Associates, Amplify's largest stockholder, and key Amplify insiders, who collectively represent approximately 57 per cent of the outstanding shares, have agreed to tender their shares in the transaction.

The transaction is subject to Amplify’s stockholders tendering a majority of Amplify’s outstanding shares on a fully-diluted basis prior to the expiration of the tender offer, certain regulatory approvals and other customary conditions, and is expected to close in the first quarter of 2018.

J P Morgan Securities LLC and Morgan Stanley and Co LLC are serving as financial advisors to Hershey in connection with this transaction, and Skadden, Arps, Slate, Meagher and Flom LLP is serving as legal advisor.

Jefferies LLC is serving as financial advisor to Amplify and Goodwin Procter LLP is serving as legal advisor.
 
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