8-K: Simply Good Foods to Acquire Only What You Need (OWYN) for $280 Million

Simply Good Foods will acquire Only What You Need (OWYN), a plant-based ready-to-drink protein shake brand, for $280 million in cash, expanding its presence in the RTD protein shake segment.

Summary

• The Simply Good Foods Company has agreed to acquire Only What You Need (OWYN) for $280 million in cash.
• OWYN is a fast-growing, plant-based ready-to-drink (RTD) protein shake brand.
• The acquisition is expected to enhance Simply Good Foods' portfolio and increase its presence in the RTD protein shake market.
• OWYN is projected to achieve approximately $120 million in net sales in 2024.
• The purchase price represents a multiple of approximately 2.3x estimated net sales and 13.3x estimated Adjusted EBITDA, including run-rate synergies.
• Simply Good Foods plans to finance the acquisition using $50 million of cash on hand and committed financing from Barclays and Deutsche Bank.
• The transaction is expected to be neutral to Adjusted Diluted Earnings Per Share in the year following closing, excluding one-time integration expenses.
• The deal is expected to close by the end of fiscal year 2024, pending customary closing conditions and regulatory clearance.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to the strategic rationale of the acquisition, the growth potential of OWYN, and the expected financial benefits. The language used is optimistic and forward-looking, indicating confidence in the deal's success.

Positives

• The acquisition diversifies Simply Good Foods' portfolio and increases its presence in the fast-growing RTD protein shake segment.
• OWYN has a strong brand with a passionate consumer base and growing mainstream appeal.
• OWYN's plant-based and allergen-free products cater to a growing consumer need.
• The acquisition is expected to create cost synergies through G&A and supply chain efficiencies.
• There is an opportunity for product enhancements and innovation by leveraging the combined R&D capabilities.
• OWYN has strong relationships with blue-chip customers and a profitable e-commerce business.

Negatives

• The contribution of OWYN is expected to be below Simply Good Foods' margins in the short term as the company invests in the business.
• The transaction is expected to be neutral to Adjusted Diluted Earnings Per Share in the year following closing, excluding one-time integration expenses.

Risks

• The ability to achieve the estimated net sales and Adjusted EBITDA for OWYN is subject to risks and uncertainties.
• The anticipated synergies from the acquisition may not be fully realized.
• There are risks associated with maintaining OWYN personnel and effectively integrating the business.
• Changes in consumer preferences and supply chain constraints could impact the business.
• The company faces competition and changes in the economy, including inflation and increasing costs.

Future Outlook

The acquisition is expected to enhance Simply Good Foods' portfolio and increase its presence in the RTD shake segment, with opportunities for growth through distribution gains, increased household penetration, and leveraging the supply chain. The company also plans to leverage the knowledge of their R&D teams to enhance core product performance and unlock white-space growth opportunities.

Management Comments

• Geoff Tanner, President and Chief Executive Officer of Simply Good Foods, stated that the acquisition is strategically compelling and will enhance their presence in the RTD shake segment.
• Mark Olivieri, President and Chief Executive Officer of OWYN, expressed pride in the brand's accomplishments and stated that the transaction is a continuation of their mission.
• Nicholas J. Singer, Founder and Managing Partner of Purchase Capital, believes the transaction will enable OWYN to leverage Simply Good Foods' capabilities and reach the next level of growth.

Industry Context

This acquisition reflects a trend of consolidation in the nutritional snacking and ready-to-drink beverage sectors, as companies seek to expand their product portfolios and market reach. The demand for plant-based and allergen-free products is also a growing trend, which OWYN caters to.

Comparison to Industry Standards

• The purchase price multiple of 2.3x estimated net sales is within the range of recent acquisitions in the consumer packaged goods sector, but the 13.3x estimated Adjusted EBITDA multiple is on the higher end, suggesting a premium paid for OWYN's growth potential and brand strength.
• Comparable acquisitions in the RTD beverage space have seen multiples ranging from 1.5x to 3.0x revenue, depending on growth rates and profitability.
• The strategic rationale of expanding into the plant-based and allergen-free market aligns with industry trends, as consumers increasingly seek healthier and more inclusive options.
• The projected net sales of $120 million for OWYN in 2024 indicates a strong growth trajectory, which is a key factor in the valuation.

Management Changes

Related Party Transactions

• Simply Good Foods will acquire OWYN from existing investor United Nutritional Brands, an affiliate of Purchase Capital LLC, and other minority investors.

Stakeholder Impact

• Shareholders of Simply Good Foods are expected to benefit from the increased scale and diversification of the company.
• OWYN employees will become part of Simply Good Foods and will continue to be led by Mark Olivieri.
• Customers of both brands will have access to a broader range of products.
• Suppliers of both companies may see increased business opportunities.
• Creditors of Simply Good Foods will be impacted by the new debt financing.

Next Steps

• The companies will proceed with integration plans.
• Simply Good Foods will work to achieve synergies through G&A and supply chain efficiencies.
• The company will focus on accelerating distribution gains and increasing household penetration.
• The R&D teams will collaborate to enhance core product performance and explore new growth opportunities.
• The transaction is expected to close by the end of fiscal year 2024, subject to customary closing conditions and regulatory clearance.

Key Dates

Keywords

acquisition, protein shakes, ready-to-drink, plant-based, nutritional snacking, Simply Good Foods, OWYN, Only What You Need, merger, food and beverage