March 27, 2013

Premium Brands to acquire Freybe Gourmet Foods

Premium Brands Holdings Corporation announced that it has signed a definitive agreement to purchase Freybe Gourmet Foods Ltd.

"This transaction provides us with another leading specialty food company that further enhances the depth and strength of our deli meats business platform," said George Paleologou, President and CEO of Premium Brands. "We will also be adding the Freybe name, which is one of western Canada's oldest and most iconic local brands, to our diverse portfolio of leading specialty food brands. Looking forward, we see significant opportunities to help Freybe grow its business and brand by leveraging both our deli meat platform's sales and marketing infrastructure as well as our proprietary distribution networks in the foodservice and retail channels."

"Freybe's modern production facility has significant unutilised capacity. Correspondingly, it is an ideal solution for replacing the capacity of our deli meats production facility in Richmond, BC, which is scheduled to be shut down later this year," stated Paleologou. "By transferring a significant portion of the Richmond plant's production to Freybe's nearby Langley facility instead of our production facilities in eastern Canada we will gain significant cost and freight synergies. Furthermore, we intend to use Freybe's unutilised production capacity to support our growth in the US through our Ferndale, Washington based business Hempler Foods Group. Hempler has in recent years been growing at an average compounded rate of almost 17% over the last three years.

"In determining who to partner with, we chose Premium Brands based on their long history of respecting the unique entrepreneurial cultures of the businesses they invest in and their commitment to producing and selling only premium quality products," said Sven Freybe, President and CEO of Freybe Gourmet Foods.

"Our family is very proud of the business we have built over the last six generations but we recognised that we needed a partner to help Freybe in the next stage of its evolution," said Henning Freybe, Freybe Gourmet Foods' retiring Chairman.

Freybe is one of western Canada's leading manufacturers of premium gourmet deli meats with annual sales of approximately US$78 million and a state-of-the-art 118,000 square foot production facility located in Langley, BC.

The purchase is expected to close shortly and is subject only to customary closing conditions. Taluswood Capital Inc. acted as financial advisor to Freybe for this transaction. The purchase price under the terms of the transaction is US$55 million. This amount will be reduced to the extent that Premium Brands assumes any funded debt and is also subject to adjustment if Freybe's net working capital at closing is above or below a defined normalised level. In addition, the purchase price will be increased by up to US$1.25 million per year for each of the next four years if Freybe is able to achieve certain performance targets.

Premium Brands Holdings Corporation, a leading producer, marketer and distributor of branded specialty food products, will fund the transaction through draws on its senior credit facilities. In conjunction with the transaction, Premium Brands negotiated a US$15.0 million increase in the credit available under these facilities.