FINALIST: Deal of the Year, $25 million to $150 million
Acquiring Sparta-based Old Orchard Brands LLC in April allowed a Canadian beverage company to add a modern plant in Michigan to better access the Midwestern market.
The $148.9 million transaction with Rougemont, Quebec-based Lassonde Industries Inc. also provided an exit for the long-time family owners of the West Michigan fruit juice and beverage producer.
According to Old Orchard founder Mark Saur, the deal between the two companies was a “perfect combination.”
“I am proud of what we have built over the past 30 years and could not think of a better owner of our brand and business than Lassonde,” Saur said at the time of the deal. “I have always admired this family-oriented business, their value system and the quality of their product offering.”
The deal that provided Saur’s exit was recognized as a finalist in the 2018 MiBiz M&A Deals of the Year Awards in the category for transactions valued between $25 million and $150 million.
Old Orchard Brands launched in 1985 as an offshoot of the Saur family’s small fruit-growing operations north of Grand Rapids, although the company went on to source most of its juices and concentrates from various global suppliers.
Old Orchard Brands LLC
As the Saur family first looked for an exit from the company more than a decade ago, they initially sold a majority interest in Old Orchard to Washington, D.C.-based Allied Capital Corp. for $64 million in 2007. Allied later sold 10 percent of its 78-percent stake in Old Orchard to Agile Fund I LLC, an investment fund that the firm co-owned.
When the downturn hit in 2009 and Allied faced financial distress, the firm asked Saur and his partners to buy its remaining 68-percent interest in the company at a discount.
However, the parties ended up in court after Agile Fund objected to the sale, saying that its stake had been diluted and that the deal with Old Orchard violated its operating agreement, according to court filings. The lawsuit was later dismissed in July 2012, leaving the Saurs back in control.
Now with the close of the Lassonde deal, Saur aims to leave the company in good hands and, at long last, make his exit.
“This is a perfect match that closes an exciting chapter for our family and employees and opens an even more exciting one,” Saur said at the time of the deal.
The Old Orchard acquisition added $12.4 million to Lassonde’s sales in the second quarter, according to a recent earnings report. Lassonde (TSX: LAS.A) expects that the Sparta operation, which employs nearly 100 people, will have “significant impacts” on its ongoing results.
In the 12-month period that ended Dec. 31, 2017, Old Orchard generated $103.3 million in sales and had adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $15.8 million.
Lassonde is investing in bolstering its presence in the fruit juice market at a time when consumers are shifting their buying habits to the products for health reasons, as they move away from sodas and other sugar-sweetened beverages.
According to California-based Grand View Research Inc., the fruit and vegetable juices market is projected to expand at a mid-single digit compound annual growth rate to $257.17 billion by 2025.
“The Old Orchard brand is recognized in the U.S. for its good reputation and enjoys strong brand loyalty especially in the central United States,” said Stefano Bertolli, vice president of communications at Lassonde. “Adding the Old Orchard brand to our product portfolio strengthens our presence in the U.S. national brands sector. It has also expanded our product offering by adding a frozen juice line and capacity in PET containers.”
The deal for Old Orchard also included a separate purchase of the company’s manufacturing facility on 12 Mile Road and M-37 for $4 million.
Currently, Lassonde Industries makes a range of ready-to-drink fruit and vegetable juices and drinks under brands such as Apple & Eve, Everfresh, Fairlee, Fruité, Graves, Oasis and Rougemont. The company employs 2,100 people at 14 plants across the U.S. and Canada.
According to Bertolli, the Old Orchard deal will particularly complement Lassonde’s Apple & Eve brand, “which is strong in the northeastern United States” and was purchased in 2014 for $147.6 million.
With the Old Orchard deal, Lassonde can better react to the changing industry dynamics domestically, Bertolli said.
“It fits well within our sustained growth strategy and improves our overall position in the United States,” he said of the Old Orchard acquisition.