Olam Food Ingredients (OFI) plans to acquire US spice and seasonings manufacturer Olde Thompson through its wholly-owned subsidiary Olam Holdings at an enterprise value (EV) of US$950 million ($1.26 billion).
Olde Thompson is a manufacturer of private label spices, seasonings, baking ingredients and spice-related housewares in the US, with facilities in New Jersey and California.
OFI is acquiring Olde Thompson from private equity firm Kainos Capital and Olde Thompson’s management shareholders.
The final consideration will be subject to adjustments for net working capital, cash, debt, and transaction expenses at closing. According to Olam International's filing to SGX dated April 28, the estimated consideration based on Olde Thompson's unaudited financials for FY2020 amounts to some US$728 million.
According to OFI, the EV of $950 million implies an EV/EBITDA multiple of approximately 11.5 times or 8.5 times "including expected synergies”.
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The acquisition of Olde Thompson is expected to be earnings and margin accretive to OFI from the first year onwards and generate potential EBITDA synergies of US$25-30 million.
The transaction is expected to close in Q2 2021. It follows OFI's other recent acquisitions in the US spices sector - chilli pepper firm Mizkan America and onion ingredients business Cascade Specialties.
OFI CEO A. Shekhar says the acquisition is "a logical move", combining OFI's back-end strengths in the supply chain and Olde Thompson's front-end capabilities in providing retail spice solutions to many major US retailers.
Olde Thompson CEO David Sugarman agrees. “For our customers, this partnership pushes Olde Thompson to the forefront of sustainable innovation as it provides access to OFI’s extraordinary international sourcing capabilities and spice expertise that will allow us toprovide a new level of traceability and transparency to the marketplace,” he says.
Greg Estep, CEO of OFI’s spices business, says, “I am very pleased that Olde Thompson’s senior executive leadership will continue at the helm, supported by dedicated teams who are domain experts in the retail space and committed to operational excellence and customer service."
Shares in Olam International closed 2 cents or 1.16% higher at $1.74 on April 28.
