Canada’s domestic fruit juice sector is poised for consolidation as Quebec’s Lassonde Industries mounts a friendly $80 million bid for Sun-Rype Products.
Lassonde recently announced it has entered an agreement with subsidiaries of Sun-Rype’s owner, the Jim Pattison Group, to buy the Kelowna, B.C.-based fruit snack and juice maker and its two U.S. affiliates for about $80 million in cash.
Lassonde, in a release, said it will finance the deal through its existing credit facility and expects to close the deal “towards the end of 2019,” pending approval from the federal Competition Bureau.
Launched by a B.C. apple growers’ co-operative as a juice venture in 1946, Sun-Rype today makes juices and fruit snacks at Kelowna in B.C.’s Okanagan Valley, and operates two U.S. plants about 500 km south, at Selah and Wapato in neighbouring Washington state.
The company, which employs about 400 people, markets its ready-to-drink fruit-based juices and drinks at retail under the Sun-Rype brand while its fruit-based snacks are under the Sun-Rype, Fruit to Go, FruitSource and Good Bites brands.
In the 12-month period ending Sept. 30, the company generated sales of about $164 million and an adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of about $9 million.
Lassonde, based at Rougemont, Que., said it expects buying Sun-Rype will improve its manufacturing footprint in Western Canada and the northwestern U.S. and “further strengthen” its presence in the Canadian branded juices and drinks sector.
The deal is also expected to “increase the access to the complementary types of products offered by the combined entities to Canadian retailers and consumers, with a growth possibility for the North American market,” Lassonde said.
“Sun-Rype is a recognized and respected brand in the market, and Lassonde intends to keep it alive for a very long time,” Lassonde president Jean Gattuso said in an Oct. 29 release.
“By joining forces, Lassonde and Sun-Rype will be well positioned to become a leading fruit-based snack and beverage company in Canada and the U.S. Hence, they will be able to provide a greater range of products to all Canadian and U.S consumers and retailers from coast to coast.”
The deal “is part of our strategy of constant and measured growth and will strengthen our presence in the Canadian and U.S. markets,” Lassonde CEO Nathalie Lassonde said in the same release.
“Lassonde is a very well respected and established Canadian company, which has been in business for over 100 years,” Jim Pattison said in the same release, noting it’s been a “key supplier to several of our companies, including Save-On-Foods and Buy-Low Foods, for decades, and will continue to be.”
Sun-Rype moved away from the co-operative model in 1993, went public in 1996 and bought the business and assets of its Washington-based co-packer, Yakama Juice, in 2010. By 2013, Pattison was Sun-Rype’s controlling shareholder and took the company private that year.
Sales volumes
Publicly-traded Lassonde, whose juice beverage brands include Oasis, Rougemont, Allen’s and Fruite, on Friday reported a one per cent increase in Canadian and U.S. sales for its third quarter ending Sept. 28 compared to the year-earlier period.
However, it noted industry sales volumes in the U.S. and Canadian fruit juice and drinks markets were down for the 12-month period.
Nathalie Lassonde, in Friday’s release, said its Q3 operating profits were affected by higher manufacturing overhead costs in the U.S. and by “a slower rate of production arising from new equipment being installed at one of our Canadian plants.”
Its selling prices “continue to be adjusted in the U.S. market,” she said, “but at a pace not sufficient to offset cost increases.”
Lassonde in recent years has expanded through investment and acquisitions, including a stake of just under 20 per cent in Niagara-based Diamond Estates Wines and Spirits and control of U.S. juice firms Apple + Eve and Clement Pappas. — Glacier FarmMedia Network
