Greencore plans major US growth after buying snacks firm Schau

Greencore has acquired US snacks producer HC Schau & Son for around €15.5m, of which€10.4m is being paid in cash.

As well as the up-front payment, the deal also involves a “deferred cash consideration” of €3.5m, and another €1.6m payable “on certain performance conditions”.

Greencore has made this move as part of plans to grow its share of the US snack food market along with its Greencore Food to Go brand.

Schau is a fresh food manufacturer with facilities in Chicago, Illinois, and Jacksonville, Florida. It produces fresh sandwiches and sushi as well as fresh meals and other ready-to-eat items, sold through both the convenience store and grocery retail channels.

Schau has an established facility in Chicago and a new high quality start-up facility in Jacksonville. For the year ended Dec 2011, it had revenues of $32m (€25.7m). This acquisition is part of Greencore’s strategy to expand its US supply snack retail network, and to build its multi-regional contract gain in Food to Go into a national food service chain.

Greencore chief executive Patrick Coveney said: “Schau, along with Marketfare, will allow us to take a strong step forward in executing the next stage of our US strategy. Greencore now has a Food to Go platform in the US that will not only enable us to better serve our existing customers, but also to support what is a significant and exciting new business opportunity.”

Greencore said the acquisition gives the group the capacity to drive growth in the US, both with existing customers and with the recent new business win. It will build on the acquisition of Marketfare Foods in April by adding scale with 7-Eleven, to whom Schau is a long-term supplier in the Chicago region.

In addition, Greencore has put in place a multi-year partnership with the new customer to supply its stores with approximately $50m (€40m) of Food to Go products on the east coast and in the mid-west from four of Greencore’s facilities. The delivery of this business will be phased in between Sept 2012 and Mar 2013.

Under the terms of the deal, Greencore will pay up-front cash consideration of $13m plus deferred cash consideration of $4.3m. An additional cash amount of up to $2.0m will be payable dependent on certain performance conditions.

The transaction will be funded from existing debt facilities and will have a minimal impact on Greencore group’s leverage. It is expected to be modestly earnings accretive from the first year of ownership. Integration and transaction expenses are estimated at $2.5m and will be treated as an exceptional item.