Utz Brands, Inc. (NYSE: UTZ), a prominent manufacturer of branded salty snacks in the U.S., has announced a significant development. Several of its subsidiaries, including Utz Quality Foods, LLC, have entered into a definitive agreement to sell certain assets to Our Home™ (“Our Home”). The agreement entails the sale of Utz’s manufacturing facilities in Berlin, PA, and Fitchburg, MA, along with specific related assets. This agreement comes on the heels of a separate transaction in February 2024, wherein Our Home acquired three manufacturing facilities and two brands from Utz. Following the completion of these transactions, Utz and Our Home will operate under a Transition Services Agreement for a period of up to 12 months. The total value of the transactions amounts to $18.5 million, subject to customary adjustments, with the anticipated closing date set for April 22, 2024. Additionally, Our Home will engage in co-manufacturing certain Utz products for a specified duration as outlined in a co-manufacturing agreement. Our Home intends to sustain and expand the operations of the acquired manufacturing facilities while extending employment offers to Utz associates working in these facilities to ensure a smooth transition.
Howard Friedman, Utz’s Chief Executive Officer, expressed his perspective on the transaction, highlighting its role in advancing the company’s optimization efforts. He emphasized the strategic focus on investing in the remaining facilities to uphold value creation initiatives. The consolidation of manufacturing facilities aligns with Utz’s supply chain transformation strategy, as delineated during the 2023 Investor Day.
Aaron Greenwald, Founder and Chief Executive Officer of Our Home, conveyed enthusiasm regarding the acquisition’s implications. He noted that the transaction would bolster Our Home’s snacking platform and manufacturing capabilities, enabling the production of various snack categories under its better-for-you brands.
Financially, the transactions are expected to yield approximately $14 million in after-tax net proceeds for Utz. These proceeds will be utilized to reduce long-term debt by approximately $9 million and bolster the company’s cash reserves by around $5 million. The reduction in debt is anticipated to marginally decrease interest expenses in fiscal 2024, given the prevailing outlook for interest rates. Utz anticipates the transactions to be accretive to its Adjusted Earnings Per Share for the full year in 2024, benefiting from the transition services agreement and the debt repayment, which will help lower interest expenses. The company maintains its projection of achieving targeted supply chain network optimization cost savings of approximately $45 million from 2024 through 2026, consistent with the guidance provided during the fiscal year 2023 earnings call in February 2024.
RBC Capital Markets LLC is acting as the exclusive financial advisor, and Cozen O’Connor P.C. is providing legal counsel to Utz Brands, Inc. Winston & Strawn LLP is serving as legal advisor to Our Home.
In tandem with this development, Utz has successfully executed a repricing of its $630 million Term Loan due in January 2028. The repricing reduces the applicable interest rate on the Term Loan, resulting in estimated annual cash interest expense savings of approximately $2 million, with no alterations to the maturity or other significant terms of the loan.
