Premium Brands Income Fund
TSX : PBI.UN

Premium Brands Income Fund

July 09, 2007 14:34 ET

Premium Brands Income Fund Announces Acquisition

VANCOUVER, BRITISH COLUMBIA--(Marketwire - July 9, 2007) - Premium Brands Income Fund (TSX:PBI.UN) a leading producer, marketer and distributor of specialty branded consumer food products announced today that it has completed the acquisition of Centennial Foodservice Partnership.

With annual sales of approximately $160 million, Centennial is western Canada's leading specialty distributor of high quality "center-of-the-plate" protein products to the foodservice industry. It currently sells and distributes its products to approximately 4,500 restaurants, hotels and institutions.

Centennial's product portfolio includes a wide range of specialty beef, poultry, pork and seafood items sourced both domestically and from around the world and sold under a number of its proprietary and exclusively licenced brands. Centennial further differentiates itself by providing fresh portion cutting services at each of its eight distribution facilities located across western Canada.

"This acquisition expands and diversifies our distribution capabilities by providing us with a proprietary network into another growing segment of the food industry. The combination of Centennial's foodservice focused network with our other proprietary distribution networks, which focus on specialty retailers, convenience stores and the concessionary industry, enables us to sell our specialty food products directly to 25,000 customers across western Canada," said Mr. George Paleologou, President. "Post the acquisition approximately 75% of our revenues will be generated through our proprietary distribution networks."

"Having followed Centennial closely for a number of years, we are thrilled to have its management group join our organization. David Carriere, Centennial's President and COO, and his team have created a unique, entrepreneurial focused organization that will fit perfectly with our other leading specialty food businesses," added Mr. Paleologou.

"This transaction is our largest acquisition yet and is a significant step in the evolution of our company," said Mr. Fred Knoedler, CEO. "Centennial fits perfectly with our two core strategies, namely our focus on specialty food products and on controlling the distribution channels through which these products are sold. It also strengthens our competitive position by further diversifying our business model and by expanding the family of businesses that make up Premium Brands today," added Mr. Knoedler.

"The combination of Centennial and Premium Brands makes sense from both a strategic and a cultural point of view as both businesses are focused on quality and differentiation and both have very strong entrepreneurial cultures," said Mr. Bob Kalef, co-founder of Centennial. "We are also very pleased to have sold Centennial to a western Canadian based company with a solid reputation for providing high quality products and service to its customers. We believe that all of Centennial's stakeholders, including its customers, employees and suppliers, will benefit from this transaction."

"We are very excited to be joining the Premium Brands group of companies," said Mr. David Carriere, President and COO of Centennial. "Looking forward we see tremendous opportunities to create sales, distribution and cost synergies. Furthermore, we are very excited by the opportunity to accelerate our growth and profitability by leveraging Premium Brands' manufacturing and marketing expertise in the specialty processed meats and convenience foods categories."

Looking forward, Premium Brands expects to generate significant synergies by introducing its specialty products into Centennial's distribution network and Centennial's unique products into its other proprietary distribution networks.

Financial Guidance

The Centennial acquisition price of $84 million, which is subject to adjustment if Centennial's net working capital position at closing is above or below a defined level, was funded through new credit facilities put into place specifically for the transaction. In addition to financing the acquisition, the new credit facilities replaced the syndicated credit facilities outstanding prior to the transaction and provide the Fund with an additional $20 million in credit capacity for future acquisitions and capital projects.

The $84 million purchase price represents Centennial's enterprise value as a portion of this amount was used to pay out all of Centennial's non-trade related debt.

Post the acquisition; the Fund estimates its current sales and EBITDA run rates to be $390 million to $400 million and $36 million to $37 million, respectively. Furthermore, after incorporating projected sales and cost synergies resulting from the Centennial acquisition, as well as normal organic sales growth, the Fund is projecting 2008 sales of $420 million to $430 million and EBITDA of $40 million to $41 million.

From a distributable cash perspective, the Centennial acquisition is expected to be immediately accretive. For the balance of 2007 the Fund expects the acquisition to generate an additional $0.11 per unit in distributable cash and for 2008 the Fund expects the incremental distributable cash resulting from the acquisition to exceed $0.25 per unit. The Fund does not, however, at this time intend to increase its cash distribution based on the higher debt levels resulting from the acquisition.

Historically, the Fund's long term targeted funded debt to EBITDA ratio has been 1.5:1. Post the implementation of the new tax rules governing publicly traded income trusts, and in contemplation of the Fund converting to a corporate structure in 2010, the Fund has now set a targeted long term funded debt to EBITDA ratio of 2.5:1. Excluding potential acquisitions and project capital expenditures the Fund expects to be below this targeted number in 2008.

The Fund's available safe habour amount, as set out in the Department of Finance's December 15, 2006 press release entitled "Guidance Provided on Normal Growth for Income Trusts and Other Flow Through Entities", was not impacted by the acquisition since no new equity was issued.

Premium Brands owns a broad range of leading branded specialty food businesses with manufacturing and distribution facilities located in British Columbia, Alberta, Saskatchewan, Manitoba and Washington. In addition, the Fund owns proprietary food distribution and wholesale networks through which it sells both its own products and those of third parties to approximately 25,000 customers. The Fund's family of brands includes Grimm's, Harvest, McSweeney's, Bread Garden, Hygaard, Quality Fresh Foods, Hempler's, Harlan's, Gloria's Catering and Centennial Foods.

This document includes forward-looking statements with respect to the Fund. Although management believes that the expectations reflected in such forward-looking statements are reasonable and represent the Fund's internal expectations and belief at this time, such statements involve unknown risks and uncertainties which may cause the Fund's actual performance and results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. Additional information about these risks and uncertainties is contained in the Fund's 2005 Annual Information Form and other documents filed electronically through the System for Electronic Document Analysis and Retrieval ("SEDAR") and which are available online at www.sedar.com.

The Fund disclaims any intention or obligations to revise forward-looking statements whether as a result of new information, future developments, or otherwise.

Contact Information

  • Premium Brands Income Fund
    George Paleologou
    President
    (604) 656-3100
    or
    Premium Brands Income Fund
    Will Kalutycz
    CFO
    (604) 656-3100