Milling & Baking News - December 17, 2019 - 11

Business

acquisition through cash on hand and
$140 million in debt, and targets deleveraging from 4.5x to 4x by the end of
fiscal 2020. Overall, we believe the transaction has potential to offer an attractive
return profile given opportunities for
top-line growth and cost synergies."
New York-based Morgan Stanley
raised its price target on Hostess to
$15 from $14 to reflect the transaction.
Digging deeper into the deal, Ms.
Kaufman pointed to the complementary capabilities of Hostess and Voortman, which she said should contribute
to accelerated top-line growth.
"In particular, we see potential for
Hostess to further accelerate Voortman's top-line growth profile by expanding its distribution footprint
to channels beyond F.D.M., notably
convenience and dollar stores, as well
as further penetrating existing distribution channels where Voortman's
distribution reach is below Hostess,"
she said. "In particular, we expect
Hostess to leverage its distribution
footprint to expand Voortman's distribution reach across food (74% ACV
vs. Hostess at 93%), as well as c-store/
drug (0.1%/3% ACV vs. Hostess at
89%/75%). From a geographic standpoint, Voortman generates 21% of its

sales in Canada, which can facilitate
Hostess' expansion into this market.
Long term, we see potential for Hostess to leverage Voortman's capabilities
to expand the Hostess brand to other
product formats."
An area of potential risk, Ms. Kaufman

'We expect our category
management expertise
at retail to also drive
Voortman's presence in
key measured channels.'
- Andrew P. Callahan,
Hostess Brands, Inc.

said, is a transition from Voortman's independent distributor model to Hostess' warehouse distribution model.
J.P. Morgan Securities L.L.C., New
York, meanwhile, raised its price target to $18 from $17 and upped its
earnings-per-share estimate for Hostess in fiscal 2020 to 78c from 76c. Hostess is expected to be one of the fastestgrowing companies in J.P. Morgan's
coverage over the next two years, the
research firm said.
"We like the deal and continue to

view Hostess as an underappreciated
growth story within consumer staples," Kenneth Goldman, research analyst with J.P. Morgan, wrote in a Dec.
3 report. "Hostess has excellent organic revenue growth prospects ahead,
a clear and effective business model,
and bottom-line expansion well into
the double-digit range each of the next
couple of years (per our model)."
Moody's Investors Service, New
York, affirmed Hostess Brands' corporate family rating at B1 and rating
outlook at stable following announcement of the proposed acquisition.
"Hostess' B1 corporate family rating reflects its high financial leverage,
concentration in low-growth snack
cakes category and moderate scale
among consumer goods companies,"
Moody's said. "The rating also reflects Hostess' well-known portfolio
of snack cake brands, high profit margins, good cash flows and very good
liquidity.
"The stable rating outlook reflects
Moody's expectation that Hostess will
maintain its good operating performance and exceed $200 million of EBITDA next year. Moody's also expects
financial leverage to decline below 5
times within the next 12 months." MBN

Ag trade initiative focused on supply
chain adopts new name: Covantis
GENEVA, SWITZERLAND - Archer
Daniels Midland Co., Bunge Ltd., Cargill,
Cofco International, Louis Dreyfus Co. and
Glencore Agriculture, founding members
of an industry-wide initiative to modernize
global trade operations, have announced a
new project name: Covantis.
The initiative aims to bring efficiencies
and cost savings to companies throughout
the international supply chain.
The initiative also launched a new web
site, www.covantis.io,
which explains its vision to connect the agriindustry via an independent and trusted digital platform to enable
post-trade efficiency for all participants.
Covantis also will be the name of the
digital platform now in development and
expected to launch in 2020 subject to regulatory approvals.
The Covantis initiative said Stefano Rettore will lead the project as an independent
adviser during its development phase until governance is in place and a chief executive officer is appointed. His responsibilities will include overseeing the search
for a c.e.o. The future entity, executive
bakingbusiness.com / world-grain.com

appointments and the platform itself remain subject to regulatory approvals.
Mr. Rettore has more than two decades
of global experience in the agribusiness industry. He was president of ADM's origination business and, prior to that, was the
company's chief risk officer. Before joining
ADM, he held a series of leadership positions at agricultural co-op CHS Inc.
"I am delighted to help lead the Covantis
initiative as we build toward the launch of
a ground-breaking new
technology platform,"
Mr. Rettore said. "Covantis offers a path to improve agricultural trade, unlocking significant value for all players across the supply
chain. By working collaboratively with the
industry, we have an opportunity to build a
more effective, more efficient digital future
for global trade."
Since announcing the project in October
2018, the group has held workshops and
roundtable discussions with a broad range
of industry stakeholders, including shippers,
charterers, buyers, service providers, financial institutions, trade associations, industry
standards and regulatory authorities. MBN

Gluten-free baked
foods maker opens
U.S. office in Illinois
CHICAGO - BFree Foods, which
debuted its gluten-free and wheatfree bread and wraps in the United States in 2015, has opened its
first U.S. office, located in Buffalo
Grove, Ill., approximately 30 miles
outside of Chicago.
"We are really overjoyed with
how the U.S. has embraced our
brand," said Chloe Twomey, advertising and promotions manager
at BFree Foods. "The time felt right
to open an office here where we
could house our operations, supply chain, marketing and sales
teams. We're excited for what the
future holds and all that we can accomplish now that we're here."
BFree Foods was founded in
Dublin, Ireland, in 2011. The company's products include wraps,
rolls, pitas, bread loaves and bagels. All BFree Foods' products are
free from allergens, gluten, wheat,
dairy, eggs, nuts and soy. They also
are vegan-friendly, low-fat, nonG.M.O. and high-fiber. MBN

Milling & Baking News

December 17, 2019 / 11

http://www.covantis.io http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - December 17, 2019

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