Farmer Brothers to Acquire Boyd Coffee Company
Farmer Bros Co is acquiring substantially all the assets of Boyd Coffee Company with a combination of cash and stock. The announcement was made after the stock market closed on 21 August.
Portland, Oregon-based Boyd’s is a privately-held coffee company in business for over 100 years. Boyd’s business model is expected to complement Farmer Brothers across customer channels, product portfolios and distribution networks, including a high-touch service model of direct-store-delivery. Family-owned Boyd’s generated revenue of approximately USD $95 million and processed and sold about 16m lbs of green coffee during the previous twelve-month period. Boyd’s coffee sales accounted for approximately 65% of revenue with the remainder of revenue primarily coming from other beverages and accessories.
Farmer Bros expects to improve overall operational efficiency by moving the production volume associated with the acquired Boyd’s business into its existing production facilities. The transition and integration of the Boyd’s business is expected to take place over the next 12-18 months.
“We believe the Boyd’s business will be an excellent strategic fit for Farmer Brothers,” says Mike Keown, CEO of Northlake, Texas-based Farmer Brothers. “We expect this acquisition will strengthen our position in the marketplace, expand our distribution footprint, and generate significant synergies.”
“We are confident Farmer Brothers is the right company to take the Boyd’s brand to the next level,” says Jeffrey Newman, CEO at Boyd’s. “We look forward to a smooth transition and providing the same high-quality customer service that has been a hallmark of the Boyd coffee company for over 100 years.”
Randy Clark, chairman of the board at Farmer Brothers, notes, “We believe Farmer Brothers is in a strong position to benefit from ongoing coffee industry consolidation by executing accretive acquisitions. Coming off the successful acquisitions of China Mist and West Coast Coffee, the Boyd transaction is another opportunity to advance Farmer Brothers’ long-term growth plans.”
The purchase price consists of up to USD $42m in cash and 21,000 shares of a new series of preferred stock, subject to adjustments for working capital and certain hold-backs of cash and stock. As of the signing date, the preliminary estimated value of the preferred stock is USD $16.6m or $789 per share, leading to an estimated value of the aggregate purchase price of $58.6m.
Boyd’s generated revenues of approximately USD $95m during the period from 1 August 2016 through 31 July 2017. Once fully integrated, Farmer Brothers currently expects the transaction to deliver between $13 to $16m in annual incremental adjusted EBITDA. One-time costs associated with the transaction, including professional fees, integration expenses and employee-related fees are expected to be approximately $9 to $11m, and capital expenditures are expected to be approximately $8 to $11m through completion of integration, which is expected to be completed in approximately 12-18 months.
In connection with this acquisition, Farmer Bros plans to amend its existing bank credit facility. The company believes this incremental liquidity, together with existing sources of cash, will be sufficient to cover the acquisition price and related one-time costs to complete the transaction.
The transaction is expected to close in the fourth quarter of calendar 2017 (the second quarter of fiscal 2018 for Farmer Brothers), subject to certain closing conditions.
Founded in 1912, Farmer Bros is a national coffee roaster, wholesaler and distributor of coffee, tea and culinary products, which include organic, direct trade and sustainably-produced coffee. The company is a direct distributor of coffee to restaurants, hotels, casinos, offices, quick service restaurants, convenience stores, healthcare facilities and other foodservice providers, as well as private-brand retailers. Farmer Bros generated net sales of over USD $500m in fiscal 2016. Its primary brands include Farmer Brothers, Artisan Collection by Farmer Brothers, Superior, Metropolitan, Cain’s, McGarvey and China Mist.
Founded in 1900, Boyd’s supplies coffee, tea and other beverages to restaurants, hotels and convenience stores.