Utz Brands sells two manufacturing facilities for $18.5M, sees accretion

Utz Brands announced that certain of its subsidiaries including Utz Quality Foods, have entered into a definitive agreement for the sale of certain assets to Our Home. Under the agreement, affiliates of Our Home have agreed to purchase the company’s Berlin, Pennsylvania, and Fitchburg, Massachusetts manufacturing facilities and certain related assets. This follows a separate transaction in February, in which Our Home purchased three manufacturing facilities and two brands from Utz. Following the closing of the transactions, Utz and Our Home will operate under a transition services Agreement for up to 12 months. The total consideration for the transactions is $18.5M, subject to customary adjustments, and the transactions are expected to close on April 22. In addition, post-closing, Our Home will co-manufacture certain Utz products for a period of time under the terms of a co-manufacturing agreement. Our Home plans to continue to operate and grow the manufacturing facilities under its platform while offering employment to Utz associates working in those facilities as part of the transition. The transactions are expected to provide approximately $14M in after-tax net proceeds, which Utz will use to pay down its long-term debt and add cash to the balance sheet. The debt reduction is expected to modestly lower interest expense in fiscal 2024 based on the company’s current outlook for interest rates. The company expects the impact of the transactions to be accretive to its adjusted EPS on a full-year basis in 2024, reflecting the benefit of the transition services agreement and the use of net proceeds from the sale to pay down long-term debt and reduce interest expense. Relative to the update we provided on our fiscal year 2023 earnings call in February, the company does not expect this transaction to materially change the pacing of targeted supply chain network optimization cost savings of approximately $45M to be achieved from 2024 through 2026. Utz announced that it has successfully completed a repricing of its $630M term loan due in January 2028. The repricing reduces the applicable interest rate on the term loan by approximately 36 bps from term SOFR plus a credit spread adjustment plus 3% to term SOFR plus 2.75%. There are no changes to the maturity of the term loan following this repricing and all other terms are substantially unchanged. Under the amended terms of the term loan, the company estimates that the repricing of debt will produce cash interest expense savings of approximately $2M annually.