Flowers Foods (FLO) To Acquire Simple Mills

Flowers Foods, Inc. (NYSE: FLO) today announced that it has entered into a definitive agreement to acquire Simple Mills for $795 million in cash. The addition of Simple Mills expands Flowers' exposure to better-for-you and attractive snacking segments and enhances the company's growth and margin prospects.

Founded in 2012 by Katlin Smith, Simple Mills is a market-leading natural brand offering premium better-for-you crackers, cookies, snack bars, and baking mixes. Built upon the belief that food has the power to spark impactful change, Simple Mills' mission is to revolutionize the way food is made to positively impact people and the planet. The brand's stunningly simple ingredients, pioneering use of nutrient-dense nut, seed, and vegetable flours, and exceptional taste have cultivated unmatched brand love and loyalty among natural and mainstream consumers alike. Simple Mills products are available nationwide across more than 30,000 natural and conventional stores. Simple Mills is estimated to have generated 2024 net sales of $240 million, representing 14% growth compared to the prior year.

"We are incredibly excited to welcome the Simple Mills team to Flowers," said Ryals McMullian, chairman and CEO of Flowers Foods. "With leading market positions and abundant white space for future growth, Simple Mills perfectly fits our strategy of adding compelling brands in better-for-you segments that complement and diversify our existing portfolio. Equally important, the brand's mission aligns with Flowers' values centered on honesty and integrity, respect and inclusion, and sustainability. Katlin and the Simple Mills team have built a remarkable business, and we look forward to collaborating with them to generate continued growth while preserving the brand's integrity and staying true to its unmatched quality and taste."

Katlin Smith, founder and CEO of Simple Mills, commented, "This transaction marks the beginning of a new phase of growth for Simple Mills and we are thrilled to join the Flowers family. I am extremely proud of our talented team and the strong brand we've built with the support of our valued partners and loyal customers. With Flowers' resources, we will be well positioned to broaden distribution, accelerate innovation, and amplify brand awareness, while advancing our mission. Flowers has a strong track record of fostering growth in its acquired companies while stewarding and protecting their brand promise. I cannot imagine a better partner for Simple Mills and the team, and I look forward to working alongside Flowers to build upon our strong history of growth."

Compelling Strategic Rationale:

Enhances growth prospects

• Adds a scaled, better-for-you snacking platform, led by a seasoned management team, that is successfully penetrating mainstream consumers and offers significant white space for future growth
• Enables future growth of the Simple Mills brand by expanding distribution, accelerating innovation, increasing velocities, and gaining access to new segments and categories
• Leverages Flowers' demonstrated ability to grow acquired companies in the better-for-you space

Diversifies category exposure

• Bolsters Flowers' growing position in better-for-you and attractive snacking categories through the addition of Simple Mills' market-leading products, which are meaningfully outpacing category growth
• Enhances portfolio strategy, increasing Flowers' proforma 2024 branded retail sales as a percentage of total net sales to approximately 66%
• Simple Mills authenticity and brand strength provide opportunity to extend across multiple snacking categories

Attractive financial profile

• Expected to be immediately accretive to net sales and adjusted EBITDA² growth and adjusted EBITDA margins³ on a proforma basis⁴
• Expected to be accretive to Flowers' earnings per share in 2026

Transaction Details:

• Flowers has entered into a definitive agreement to acquire Simple Mills for $795 million in cash from Katlin Smith, Simple Mills management, Vestar Capital Partners (the largest individual shareholder), and initial angel investors
• Flowers has entered into a binding commitment letter for a $795 million term loan from Royal Bank of Canada to help fund the transaction as required. Proforma total net debt⁵ estimated at the closing date will be approximately $1.9 billion and the proforma total net debt-to-EBITDA ratio is expected to be in the range of 3.1x to 3.3x.⁶ Flowers intends to maintain its balanced capital deployment model, along with a commitment to its investment grade debt rating.
• The transaction is subject to customary regulatory approval and closing conditions and is anticipated to close in the first quarter of 2025
• Upon closing, Simple Mills will operate as an independent subsidiary of Flowers Foods and continue to be led by founder and CEO Katlin Smith and her leadership team. Simple Mills will maintain its operations in Chicago, Illinois and Mill Valley, California.
• RBC Capital Markets LLC acted as exclusive financial advisor and Jones Day acted as legal counsel to Flowers Foods in this transaction. Piper Sandler and Centerview Partners served as the financial advisors and Ropes & Gray LLP served as legal counsel to Simple Mills in this transaction. Royal Bank of Canada is acting as administrative agent and sole bookrunner on the term loan.

Transaction Webcast:

The company will host a live webcast to discuss the transaction today at 8:30 a.m. Eastern Time. Access to the webcast, along with this press release and a supporting slide presentation, will be available and archived on the investors page of flowersfoods.com.

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