Hostess Brands, Inc. (NASDAQ: TWNK, TWNKW) (“Hostess” or the “Company”), and Voortman Cookies Limited (“Voortman”) have announced that they have executed an agreement under which Hostess will acquire Voortman, a rapidly growing manufacturer of premium, branded wafers as well as sugar-free and specialty cookies, from Swander Pace Capital for approximately $320 million (C$425 million) in cash, including a customary working capital adjustment, representing a post-synergy 9.1x1 EBITDA transaction multiple. The transaction has been unanimously approved by the Hostess board of directors. Hostess expects to close the transaction in early January 2020, subject to customary closing conditions.

“Voortman is a leading brand with a well-defined consumer position that complements and extends the growing Hostess portfolio into the growing cookie and better-for-you sweet snacking categories with meaningful runway for future growth,” commented Andy Callahan, Hostess’ president and chief executive officer. “We believe the acquisition of Voortman will create significant value for all of our stakeholders. We expect the combination of Hostess’ lean, proven operating model and Voortman’s brand and adjacent category position, will result in meaningful cost savings and growth opportunities. This acquisition fits well into our long-term growth strategy and we are confident that Voortman will be a great addition to our existing sweet baked goods snacking and breakfast portfolio.”

“The team at Voortman is excited about becoming part of the Hostess portfolio and the prospects for further dramatic growth of the Voortman brand behind the exceptional capabilities of the Hostess organization,” commented Douglas MacFarlane, CEO of Voortman.

Voortman is the #1 player in crème wafers and sugar free cookies, as reported by Nielsen for the 52-week period ended November 2, 2019 and has achieved compound annual point of sale growth over the last three years of approximately 5 percent. Founded in 1951 by brothers William and Harry Voortman and headquartered in Burlington, Ontario, Canada, Voortman is a leading manufacturer of premium, branded wafers as well as sugar-free and specialty cookies with distribution mainly in the United States and Canada. Voortman’s product ingredients, flavor profiles and better-for-you characteristics complement Hostess’ sweet baked goods snacking business.

Compelling Strategic and Financial Benefits

The transaction will create a larger and more diversified sweet snacking company. Hostess believes the combination will provide the following strategic and financial benefits:

Diversifies and Expands Product Offerings and Manufacturing Capabilities in Attractive, Adjacent Category: The combination of Hostess’ existing portfolio of iconic new and classic treats including Hostess Cupcakes, Twinkies, Donettes, Ding Dongs, Zingers, Danishes, Honey Buns and Coffee Cakes among others, with the market leading Voortman brand of premium wafers and sugar free and specialty cookies together creates a more diverse company. By adding the Voortman brand, Hostess expects to compete with its uniquely positioned and differentiated products in the large and growing $8.4 billion cookie category and have greater growth opportunities provided by a more diverse portfolio of brands and products.

Leverages Hostess’ Broad Customer Reach and Lean and Agile Business Model: Complementary sales channels provide actionable whitespace opportunities and potential to accelerate revenue growth for Voortman by leveraging Hostess’ proven distribution and merchandising capabilities. The combined company expects to realize additional benefits of scale via sharing established, efficient infrastructure and strengthening of collaborative retail partnerships in the United States and Canada.

Significant Cost Synergy Opportunities: Hostess expects the transaction to deliver on key growth opportunities while achieving at least $15 million in annual run-rate cost synergies within 12-18 months. Cost synergies have been identified primarily from leveraging the Hostess operating model including procurement, operations, and logistics. Based on identified cost synergies, innovation pipeline and growth trajectory, Hostess believes there is opportunity to continue investing in the Voortman business and expand margins that should, over time, be in the top quartile of our peers and be accretive to Hostess margins.

Compelling Financial Benefits: Hostess expects the transaction to provide approximately $20 million of incremental adjusted EBITDA in 2020, growing to $40 to $50 million by 2022. Mid-single digit earnings per share accretion is expected in 2020 (excluding investments in integration) with double-digit accretion thereafter, upon full achievement of cost synergies.