General Mills Inc., the maker of Cheerios, Bisquick and Yoplait, is acquiring Berkeley, California-based Annie’s Inc. for about $820 million, gaining a popular lineup of natural and organic foods.
Annie’s investors will receive $46 a share in cash, General Mills said in a statement, 37 percent above its closing price yesterday. The deal, slated to close this year, will pair Annie’s products with General Mills’ existing organic foods, including the Cascadian Farm and Food Should Taste Good brands.
Private equity firm Solera Capital LLC, founded by J.P. Morgan & Co. veteran Molly Ashby, acquired control of the business in 2002.
"When you looked at a lot of the brands in that space, they had good penetration in Whole Foods, and in the natural channel, but really small penetration in mainstream grocery," says Ashby. For more on Solera's involvement with the food company, see "Annie's Molly Ashby Shares Secrets of Success."
The company, which had been based in the Boston area, eventually relocated to Napa, California, and then Berkeley -- a hotbed of the organic-food movement. Annie’s held an initial public offering in 2012, raising $95 million. Solera reduced its stake in the IPO and then again in an offering the following year.
Large packaged-food companies are increasingly looking to natural products to help spur growth in a sluggish industry. Annie’s is known for its bunny-shaped crackers -- the company’s stock-exchange ticker is BNNY -- as well as organic macaroni and cheese. The deal should start boosting General Mills’ profit within the first year, excluding transaction expenses, the company said.
“Annie’s competes in a number of attractive food categories, with particular strength in convenient meals and snacks -- two of General Mills’ priority platforms,” Jeff Harmening, chief operating officer of the Minneapolis-based company’s U.S. retail business, said in the statement.
Annie’s shares climbed as much as 40 percent to $46.97 in late trading. The stock had fallen 22 percent this year through yesterday’s close, hurt by lower-than-projected profit and rising ingredient costs.
Annie’s posted sales of $204 million in its most recent fiscal year. That compares with about $330 million in revenue for General Mills’ organic-product division, which also includes Muir Glen tomatoes and Larabar energy bars.
Annie’s was co-founded in 1989 by Annie Withey, aiming to provide natural foods for moms to feed their families. She initially built the business by word of mouth. Withey, whose rabbit Bernie inspired the company’s bunny mascot, still writes the personal letters printed on the product boxes and “remains the inspiration and corporate conscience” for the company’s products, according to its website.
Annie’s Chief Executive Officer John Foraker said yesterday that the General Mills takeover will help boost distribution of the company’s products while preserving its mission.
“Annie’s has proven you can indeed do well by doing good,” he said in a note to employees. “These values and the magic of the Annie’s brand are key elements of our success - and something General Mills admires.”
Better-for-you food brands have been attracting investor attention as consumer eating habits have shifted away from a three-meals-a-day, meat-and-potatoes diet towards smaller, healthier meals. For more on the trend, see "Snack Time."
-Additional reporting by Allison Collins