B&G Foods to Acquire Specialty Brands - Analyst Blog

B&G Foods, Inc. BGS recently entered into an agreement to acquire packaged foods company, Specialty Brands of America, Inc. from affiliates of American Capital, Ltd. ACAS for about $155 million in cash. The acquisition is expected to close during the second or third quarter of 2014.

The deal includes acquisition of Specialty Brands' largest brand - Bear Creek Country Kitchens hearty dry soups as well as other brands like Spring Tree, Cary's, and MacDonald's syrups and New York Flatbreads and Canoleo margarine. These brands complement the existing portfolio of B&G Foods.

As a packaged foods company, B&G Foods is set to beef up its product offerings as evident from its three acquisitions in 2013, including Pirate Brands from Robert's American Gourmet Food, TrueNorth from DeMet's Candy Company and New York Style and Old London from Chipita America.

Though these acquired brands are parts of larger companies, all of them have a distinctive competitive advantage, strong margins and generate near about $100 million in sales. These acquisitions made significant contribution to B&G Foods 2013 top line. The acquisition of Specialty Brands is expected to generate similar results.

MD-based, American Capital Ltd. provides capital to middle-market companies with sales between $10–$750 million. In addition to Specialty Brands, the company has invested across a diverse range of industries and geographies. American Capital and its affiliates invest up to $500 million per company in North America. At times, American Capital sells a portfolio company in order to improve better allocation of its resources.

As both BGS and American Capital reported disappointing earnings result in the last reported quarter, both the companies currently have a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the packaged goods sector include Diamond Foods, Inc. DMND and J&J Snack Foods Corp. JJSF. Both the stocks hold a Zacks Rank #2 (Buy).