8-K: HF Foods Group Completes Searay Foods Acquisition

HF Foods Group Inc. has finalized its acquisition of Searay Foods Inc. and Morgan Foods Inc., expanding its international footprint and product offerings.

Summary

• HF Foods Group Inc. has completed the acquisition of Searay Foods Inc. and Morgan Foods Inc. (collectively, the Company Group) on August 31, 2026.
• The acquisition was made through a Securities Purchase Agreement dated July 17, 2026, as amended on August 27, 2026.
• The aggregate base purchase price was CAD$47,921,740, which is five times the baseline Adjusted EBITDA of CAD$9,556,348.
• The payment consisted of CAD$38,365,392 in cash and 1,701,871 shares of HF Foods common stock at $4.00 per share.
• Sellers are eligible for contingent earnout payments based on future EBITDA targets over two to three years.
• An amendment to the agreement subordinates earnout payments to credit facilities and introduces simple interest at SOFR + 2% on deferred earnout payments.
• The company also obtained consent from its lenders to allow Searay Canada, Morgan Foods, and related subsidiaries to join its credit agreement within five business days post-closing.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive development, marking a significant strategic acquisition that is expected to be accretive and expand the company's international presence.

Positives

• Completion of a strategic acquisition that expands HF Foods' international presence into Canada.
• The acquisition is expected to be immediately accretive to margins and EPS.
• The purchase price multiple of 5.0x Searay's 2025 Adjusted EBITDA is considered reasonable.
• Searay Foods brings a strong financial profile with industry-leading margins and a track record of consistent growth.
• The acquisition provides a platform in Canada and a deeper presence in specialty frozen seafood.
• Synergies are expected from combining Searay's portfolio with HF Foods' national scale, including cross-selling and supply chain efficiencies.
• Searay's existing management team, led by Derick Ngan, will continue to manage its operations as a subsidiary.

Negatives

• Earnout payments are subordinated to the Buyer Entities' credit facilities, potentially delaying or reducing their payout.
• Deferred earnout payments will accrue simple interest at SOFR + 2% per annum.
• The requirement to obtain certain third-party consents was waived as a closing condition, with Sellers providing uncapped indemnification for losses arising from failure to obtain them.
• The credit agreement consent allows for a delay of up to five business days (or longer if agreed) for Searay Canada and Morgan Foods to join the credit agreement.

Risks

• Potential difficulties in integrating Searay's operations and realizing anticipated synergies.
• Risks associated with foreign currency fluctuations.
• The possibility that earnout payments may be restricted or delayed due to senior lender credit facilities.
• Uncapped indemnification by Sellers for losses related to failure to obtain certain third-party consents.
• Failure to obtain the Searay Joinder by the Searay Joinder Date would constitute an Event of Default under the credit agreement.

Future Outlook

The acquisition is expected to be immediately accretive to margins and EPS. Contingent earnout payments are payable based on the achievement of specified EBITDA targets over a twoto three-year period following closing. The company aims to leverage Searay's platform in Canada and its specialty frozen seafood offerings to capture cross-selling and supply chain synergies.

Management Comments

• "With Searay now a part of HF Foods, we have established a platform in Canada and a deeper presence in specialty frozen seafood, a category that represents a meaningful and growing share of our business."
• "Searay brings a strong financial profile, including industry-leading margins and a track record of consistent growth, and we look forward to combining its multi-brand portfolio with our national scale to capture significant cross-selling and supply chain synergies."

Industry Context

StockSavvy.ai notes that this acquisition aligns with broader industry trends of consolidation and international expansion within the foodservice distribution sector, particularly for companies seeking to broaden their ethnic and specialty product offerings and geographic reach.

Management Changes

Stakeholder Impact

• Shareholders: Potential for increased value due to accretive acquisition, but contingent earnout payments are subordinated to credit facilities.
• Sellers: Receive a combination of cash and stock, with potential for additional earnout payments, but subject to subordination and interest accrual on deferred payments. Also provide uncapped indemnification for certain consent failures.
• Lenders: Consent granted for delayed joinder of acquired entities to credit facilities, with provisions for interest on deferred earnouts and release of Searay Acquisition Reserve.
• Employees: Searay's existing management team will continue to lead operations, suggesting continuity for employees.

Next Steps

• Searay Canada, Morgan Foods, and any subsidiary formed or acquired in connection with the Acquisition are to become parties to the Credit Agreement and related loan documents within five business days following the closing (or such later date as agreed by the Administrative Agent).
• Sellers shall use their best efforts to obtain the Excluded Consents as promptly as practicable following the Closing.
• Financial statements and pro forma financial information required by Item 9.01 will be filed by amendment within 71 days.

Key Dates

Recommendation

The acquisition is a positive strategic move, expanding market reach and expected to be accretive. However, the subordination of earnout payments to credit facilities and the uncapped indemnification for consent failures introduce some uncertainty and potential risk. While the core transaction is sound, these complexities warrant a 'hold' recommendation pending further clarity on integration and earnout realization.

Keywords

Acquisition, Searay Foods, Morgan Foods, HF Foods Group, Foodservice, Seafood Distribution, International Expansion, EBITDA