The acquisition has been approved by the boards of directors of both companies. It is subject to approval by Penford’s shareholders and regulators, as well as to other customary closing conditions and could close as early as the end of the year. Ingredion expects to fund the approximately $340 million cash transaction with available cash and funds available under existing credit facilities.
“This acquisition is another step in executing our strategic blueprint for growth," said Ilene Gordon, Ingredion chairman and CEO. “It expands our higher-value specialty portfolio, establishes manufacturing of specialty potato starches in North America, and builds our presence in nature-based hydrocolloid ingredient. Penford’s range of products addresses growing consumer trends, including nutrition, gluten-free, food textures, and sustainable green solutions. The added capabilities will further enhance our efforts to deliver new, value-added solutions to the marketplace."
Penford had net sales of $467 million in fiscal year 2013. The company supplies a broad range of texture solutions for food, including customized combinations of texture ingredients with a particular emphasis on potato starches. Penford’s starch-based products for non-food applications include sustainable, nature-based solutions designed to replace synthetic ingredients.
With approximately 445 employees, Penford operates six plants in the United States, all of which make specialty starches. Its headquarters are based in Centennial, Colorado.
The transaction is expected to generate annual cost synergies of at least $20 million, primarily from efficiencies in the areas of manufacturing, procurement, logistics and general and administrative functions. The purchase price represents a synergy-adjusted EBITDA multiple of approximately seven times on an enterprise-value basis. Excluding one-time costs, in the first year the transaction is expected to be $0.10 to $0.15 accretive to earnings on a per share basis.
J.P. Morgan is acting as financial advisor to Ingredion, and Sidley Austin LLP is acting as legal advisor.
Ingredion also plans to invest approximately USD $100 million to increase its manufacturing capacity for specialty ingredients. The expansion is driven by a growing demand for the company’s ingredients.